Ethnic fractionalization and aid-corruption linkages: Evidence from African countries

The study investigates whether ethnic fractionalization might play a role in the controversial aid-corruption relationship characterizing most of recipient countries in the world. It may exert pressure on the redistributive process within a given society thus clarifying why aid can be sometimes diverted from more productive uses, causing it to be ineffective or even harmful. Heterogeneity of corruption across countries calls attention to the potential non-linearity in the relationship between corruption and its determinants. An appropriate quantile regression approach for panel data applied to 38 African countries shows that foreign aid exerts a direct beneficial effect on corruption only in least corrupt countries and the reverse in more corrupt countries. Ethnic fractionalization, instead, exerts a direct strong detrimental effect on corruption but contributes to modify the effectiveness of aid campaigns depending on the corruption level, thus raising doubts about adequacy of an equal management of international aid around the world