Elite Capture of Foreign Aid : Evidence from Offshore Bank Accounts – World Bank

Development Aid – Corruption

Elite Capture of Foreign Aid : Evidence from Offshore Bank Accounts
World Bank – Policy Research Working Paper (English)
Jørgen Juel Andersen, Niels Johannesen, Bob Rijkers
2020/02/18 :: 46 papers
PDF: http://documents.worldbank.org/curated/en/493201582052636710/pdf/Elite-Capture-of-Foreign-Aid-Evidence-from-Offshore-Bank-Accounts.pdf
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.

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World Bank Group Statement on Development Research
WASHINGTON, February 18, 2020—Due to heightened interest in a Working Paper published by the World Bank, the institution has issued the following statement :
“Research conducted at the World Bank Group aims to support better country outcomes for the poor and vulnerable. The Bank is ranked first among research institutions in development, and our knowledge services undergo extensive review to ensure quality. The Bank publishes almost 400 working papers annually, often as works-in-progress disseminated informally to stimulate discussion and serve as a catalyst for more research.

We fully support our research department’s work to generate independent, relevant, peer-reviewed research, including on the important topic of illicit financial flows. World Bank Group management takes corruption and related fiduciary risks very seriously, especially given the challenging environments in which we need to work to achieve our poverty mission. The draft paper, ‘Elite Capture of Foreign Aid’ underwent several reviews, and it was improved as a result. The revised paper, now published as a World Bank Working Paper addresses a number of comments raised during the review process.

The World Bank Group strongly supports rule of law and good governance practices. We have strict procurement and financial management procedures in place that deter and detect corruption and irregularities in IDA and IBRD funded projects and programs and hold violators accountable wherever possible.”