Abstract
ABSTRACT This study estimates the effect of foreign aid on corruption using a Two-Step Least Squares method. We address endogeneity using instrumental variables that capture geographical and cultural proximities between donor and recipient countries. Based on a panel framework of 122 countries for the period 2005–2017, we find no significant impact of foreign aid on corruption. Our benchmark results remain insignificant even after checking with respect to different samples, estimation techniques, and the types of aid.
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