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Public fiscal behaviour & aid heterogeneity in aid-recipient economies

Author

Listed:
  • George Mavrotas
  • Bazoumana Ouattara

    (World Institute for Development Economics Research, Finland
    University of Wales Swansea, England)

Abstract

The paper develops a model of public fiscal behaviour of the aid-recipient government in the presence of both endogenous and heterogeneous foreign aid. We endogenize aid on the grounds that the recipient government has some influence over aid disbursements. Regarding aid heterogeneity, it is argued that each of the main four categories of aid, namely project aid, programme aid, technical assistance and food aid may exert different effects on the recipient economy. Furthermore, in case the preferences of the aid-recipient government are higher for some of these types of aid, neglecting aid heterogeneity would lead to aggregation bias in the results and conclusions. The model adds an important new dimension to the vast aid effectiveness literature and calls for further modelling as well as empirical work in this promising research area so that significant policy implications can be derived.

Suggested Citation

  • George Mavrotas & Bazoumana Ouattara, 2006. "Public fiscal behaviour & aid heterogeneity in aid-recipient economies," Journal of Developing Areas, Tennessee State University, College of Business, vol. 39(2), pages 1-15, January-M.
    • Handle: RePEc:jda:journl:vol.39:year:2006:issue2:pp:1-15
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    Citations

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    Cited by:

    1. Hudson, John, 2015. "Consequences of Aid Volatility for Macroeconomic Management and Aid Effectiveness," World Development, Elsevier, vol. 69(C), pages 62-74.
    2. Philip Michael Kargbo & Kunal Sen, 2014. "Aid Categories that Foster Pro‐Poor Growth: The Case of Sierra Leone," African Development Review, African Development Bank, vol. 26(2), pages 416-429, June.
    3. George Mavrotas, 2009. "Introduction: Development Aid-Theory, Policies, and Performance," Review of Development Economics, Wiley Blackwell, vol. 13(s1), pages 373-381, August.

    More about this item

    Keywords

    public fiscal behaviour; aid heterogeneity; fiscal response literature; foreign aid effectiveness;
    All these keywords.

    JEL classification:

    • F35 - International Economics - - International Finance - - - Foreign Aid
    • H39 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Other

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