Official Development Aid flows are volatile, non-predictable and, also, nontransparent. All these features give rise to asymmetric information about the amount of aid flows received by developing countries. This article uses a political economy model of rent extraction to show how this asymmetry (i) encourages rent extraction by kleptocratic regimes, thus reducing aid efficiency, and (ii) increases the negative impact of aid volatility. The empirical relevance of the model is confirmed on a yearly panel data on developing countries. Using various specifications and econometric methods, I develop new yearly estimates of aid volatility and aid efficiency. I show that introducing more information increases aid efficiency, which is robust to the use of different proxys for information. I also show that the negative impact of aid volatility on aid efficiency vanishes once one controls for information. These results, which confirm preliminary evidence by micro studies on public servants incentives, shed a new light on the aid efficiency debate
