Sorting out the Aid-Corruption Nexus

We employ matching methods to explore the relationships between foreign aid flows and corruption in recipient countries. Data are drawn from recipients of foreign aid for the 1996 to 2013 period. We find no compelling evidence of an effect running from corruption to aid flows. Furthermore, point estimates imply that corruption reforms lead countries to receive less aid. Alternatively, we generally find that, over a 10-year horizon, a sustained increase in aid leads to more corruption in a recipient. It is the sustained nature of an aid increase that seems to be important for this effect. (We generally do not report significant results for large changes in aid that are not sustained over time.)