This paper analyses the impact of aid flows on governance. Using an instrumental variable approach and a large country sample, we find that aid has a negative rather than a positive influence on governance. This outcome is robust to various model specifications.

Policymakers in developing countries have increasingly pinned their hopes on bilateral investment treaties (BITs) in order to improve their chances in the worldwide competition for foreign direct investment (FDI). However, the effectiveness of BITs in inducing higher FDI inflows is still open to...