Elite Capture of Foreign Aid: Evidence from Offshore Bank Accounts

46 Pages Posted: 20 Feb 2020

See all articles by Jørgen Juel Andersen

Jørgen Juel Andersen

Norwegian School of Management (BI)

Niels Johannesen

University of Copenhagen

Bob Rijkers

World Bank

Multiple version iconThere are 3 versions of this paper

Date Written: February 18, 2020

Abstract

Do elites capture foreign aid? This paper documents that aid disbursements to highly aid-dependent countries coincide with sharp increases in bank deposits in offshore financial centers known for bank secrecy and private wealth management, but not in other financial centers. The estimates are not confounded by contemporaneous shocks such as civil conflicts, natural disasters, and financial crises, and are robust to instrumenting with predetermined aid commitments. The implied leakage rate is around 7.5 percent at the sample mean and tends to increase with the ratio of aid to GDP. The findings are consistent with aid capture in the most aid-dependent countries.

Suggested Citation

Andersen, Jørgen Juel and Johannesen, Niels and Rijkers, Bob, Elite Capture of Foreign Aid: Evidence from Offshore Bank Accounts (February 18, 2020). World Bank Policy Research Working Paper No. 9150, Available at SSRN: https://ssrn.com/abstract=3540978

Jørgen Juel Andersen (Contact Author)

Norwegian School of Management (BI) ( email )

P.O. Box 580
NO - 1302 Sandvika
Norway

Niels Johannesen

University of Copenhagen ( email )

Nørregade 10
Copenhagen, København DK-1165
Denmark

Bob Rijkers

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

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