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 center known for bank secrecy and private wealth management, but no other financial centers. The estimates are not confounded b contemporaneous shocks such as civil conflicts, natural disasters, and financial crises, and are robust to instrumenting wit predetermined aid commitments. The implied leakage rate i 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. By Jørgen Juel Andersen, Niels Johannesen, Bob Rijkers. Full text-> World Bank Group
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