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.

The empirical U-shaped pattern between product diversification and economic development has been widely examined, but here we analyze the determinants of diversification. We find that a high level of rent-seeking activities has a large impact on the diversification of nations: in countries where...