Aiding and Abetting: An Empoirical Study of the Effects of Foreign Aid on the Rule of Law in sub-Saharan Africa

Abstract

Bringing the empirical analysis of econometrics to the debate of the effects of foreign aid on countries located in sub-Saharan Africa, this paper analyzes the effect of foreign aid on the rule of law by using instrumental variable analysis. Using a random effects model, and instrumenting for foreign aid with an innovative instrument, the percentage of the population living with HIV, this paper found that foreign aid has a significant, negative impact on the rule of law: roughly 1/6 a standard deviation Ceteris Paribus. This paper not only provides support for a reduction of foreign aid, it introduces and justifies a new instrument that can be used in further study of the region.