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Is Foreign Aid Fungible? The Case of Indonesia

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Author Info
Pack, Howard
Pack, Janet Rothenberg
Abstract

This paper considers whether foreign aid given for specific categories of expenditure is fungible among them and whether aid reduces tax effort by the recipient government. Models developed to analyze the fiscal relations among different levels of government in the United States are applied to analysis of the impact of foreign aid. Econometric analysis of data for Indonesia reveals that aid is largely spent as the donors intended, that aid does not lead to a reduction in tax effort, and that aid is not diverted to nondevelopment current expenditures. Copyright 1990 by Royal Economic Society.

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Article provided by Royal Economic Society in its journal The Economic Journal.

Volume (Year): 100 (1990)
Issue (Month): 399 (March)
Pages: 188-94
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Handle: RePEc:ecj:econjl:v:100:y:1990:i:399:p:188-94

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  2. Agbonyitor, Albert D. K., 1998. "Development expenditures and the local financing constraint," Policy Research Working Paper Series 1907, The World Bank. [Downloadable!]
  3. McGillivray, Mark & Ouattara, Bazoumana, 2003. "Aid, Debt Burden and Government Fiscal Behaviour: A New Model Applied to C.te d'Ivoire," Working Papers UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER). [Downloadable!]
  4. Haider A. Khan, 2005. "Governance and Effectiveness of Japanese Aid: Towards Optimality," CIRJE F-Series CIRJE-F-331, CIRJE, Faculty of Economics, University of Tokyo. [Downloadable!]
  5. Haider Khan, 2002. "Japanese Foreign Aid, Development Expenditures and Taxation in Thailand: Econometric Results from a Bounded Rationality Model of Fiscal Behavior," CIRJE F-Series CIRJE-F-188, CIRJE, Faculty of Economics, University of Tokyo. [Downloadable!]
  6. Peter Boone, 1995. "Politics and the Effectiveness of Foreign Aid," NBER Working Papers 5308, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  7. Ira N. Gang & Haider Ali Khan, 1998. "Foreign Aid and Fiscal Behavior in a Bounded Rathionality Model: Different Policy Regimes," Departmental Working Papers 199812, Rutgers University, Department of Economics. [Downloadable!]
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  8. Feeny, Simon & McGillivray, Mark, 2002. "Aid, Public Sector Fiscal Behaviour and Developing Country Debt," Working Papers UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER). [Downloadable!]
  9. Haider A. Khan, 2003. "The Future of Japanese Aid to South and Southeast Asia: A Comparative Analysis," CIRJE F-Series CIRJE-F-233, CIRJE, Faculty of Economics, University of Tokyo. [Downloadable!]
  10. Devarajan, Shantayanan & Rajkumar, Andrew Sunil & Swaroop, Vinaya, 1999. "What does aid to Africa finance?," Policy Research Working Paper Series 2092, The World Bank. [Downloadable!]
  11. Feyzioglu, Tarhan & Swaroop, Vinaya & Min Zhu, 1996. "Foreign aid's impact on public spending," Policy Research Working Paper Series 1610, The World Bank. [Downloadable!]
  12. McGillivray, Mark & Morrissey, Oliver, 2001. "Fiscal Effects of Aid," Working Papers UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER). [Downloadable!]
  13. Zafar Iqbal, 1997. "Foreign Aid and the Public Sector: A Model of Fiscal Behaviour in Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 36(2), pages 115-129. [Downloadable!]
  14. Devarajan, Shantayanan & Swaroop, vinaya, 1998. "The implications of foreign aid fungibility for development assistance," Policy Research Working Paper Series 2022, The World Bank. [Downloadable!]
  15. Djajic, Slobodan, 2008. "Foreign Aid, Infrastructure Development, and Welfare: An Intertemporal Analysis," Working Papers RP2008/64, World Institute for Development Economic Research (UNU-WIDER). [Downloadable!]
  16. Santanu Chatterjee & Paola Giuliano & Ilker Kaya, 2007. "Where Has All the Money Gone? Foreign Aid and the Quest for Growth," IZA Discussion Papers 2858, Institute for the Study of Labor (IZA). [Downloadable!]
  17. van de Walle, Dominique & Ren Mu, 2007. "Fungibility and the flypaper effect of project aid : micro-evidence for Vietnam," Policy Research Working Paper Series 4133, The World Bank. [Downloadable!]
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  18. Neva Novarro, 2004. "Do Policy-Makers Earmark to Constrain their Successors? The Case of Environmental Earmarking," Working Papers 0408, College of the Holy Cross, Department of Economics. [Downloadable!]
  19. Chen, Shaohua & Mu, Ren & Ravallion, Martin, 2008. "Are there lasting impacts of aid to poor areas ? Evidence from rural China," Policy Research Working Paper Series 4084, The World Bank. [Downloadable!]
  20. Haider Ali Khan, 2002. "How Effective Is Japanese Foreign Aid? Econometric Results from a Bounded Rationality Model for Indonesia," CIRJE F-Series CIRJE-F-164, CIRJE, Faculty of Economics, University of Tokyo. [Downloadable!]
  21. Augustin Kwasi Fosu, 2000. "The International Dimension of African Economic Growth," CID Working Papers 34, Center for International Development at Harvard University. [Downloadable!]
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