This paper investigates whether foreign aid from China and the World Bank is prone to political capture in aid-receiving countries. It examines whether more aid is allocated to the birth regions of political leaders, controlling for indicators of need and various fixed effects.
Its econometric results show that in certain African countries political leaders’ birth regions receive substantially larger financial flows from China in the years when they hold power compared to what the same region receives at other times. Interestingly, we observe no such pattern of favouritism in the spatial distribution of World Bank development projects.
This paper is relevant from the perspective of international organizations documenting that political leaders of African countries can capture/misuse foreign aid.