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Public finance, aid and post-conflict recovery

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  • James K. Boyce

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    (University of Massachusetts Amherst)

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    Abstract

    In the wake of violent conflict, a key element of building a durable peace is building a state with the ability to collect and manage public resources. To implement peace accords and provide public services, the government must be able to collect revenue, allocate resources, and manage expenditure in a manner that is regarded by its citizens as effective and equitable. This paper addresses eight key issues related to this challenge. The first four pertain to resource mobilization: (i) How should distributional impacts enter into revenue policies? (ii) How can postwar external assistance do more to prime the pump of domestic revenue capacity? (iii) Should macroeconomic strictures prescribed for economic stabilization be relaxed to foster political stabilization? (iv) How should the benefits of external resources be weighed against their costs? The second four issues relate to the expenditure side of public finance: (i) How should the dynamics of conflict be factored into public spending policies? (ii) Can the pathologies of a ‘dual public sector’ – one funded and managed by the government, the other by the aid donors – be surmounted by channeling external resources through the government, with dual-control oversight mechanisms to reduce corruption? (iii) How should long-term fiscal sustainability enter into short-term expenditure decisions? (iv) Lastly, is there scope for more innovative solutions to postwar legacies of external debts?

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    Bibliographic Info

    Paper provided by University of Massachusetts Amherst, Department of Economics in its series UMASS Amherst Economics Working Papers with number 2007-09.

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    Date of creation: Sep 2007
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    Handle: RePEc:ums:papers:2007-09

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    Keywords: peacebuilding; revenue mobilization; external assistance; foreign aid; post-conflict transitions; public expenditure; horizontal equity; odious debt.;

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    1. Frances Stewart, 2000. "Crisis Prevention: Tackling Horizontal Inequalities," Oxford Development Studies, Taylor & Francis Journals, vol. 28(3), pages 245-262.
    2. Peter S. Heller, 2005. "Pity the Finance Minister," IMF Working Papers 05/180, International Monetary Fund.
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    7. Michael Carnahan, 2007. "Options for Revenue Generation in Post-Conflict Environments (revision)," Working Papers wp137_revised, Political Economy Research Institute, University of Massachusetts at Amherst.
    8. Baunsgaard, Thomas & Keen, Michael, 2010. "Tax revenue and (or?) trade liberalization," Journal of Public Economics, Elsevier, vol. 94(9-10), pages 563-577, October.
    9. Todd Moss & Gunilla Pettersson & Nicolas van de Walle, 2006. "An Aid-Institutions Paradox? A Review Essay on Aid Dependency and State Building in Sub-Saharan Africa," Working Papers 74, Center for Global Development.
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    11. Eifert, Benn & Gelb, Alan, 2005. "Improving the dynamics of aid : towards more predictable budget support," Policy Research Working Paper Series 3732, The World Bank.
    12. Khattry, Barsha & Mohan Rao, J., 2002. "Fiscal Faux Pas?: An Analysis of the Revenue Implications of Trade Liberalization," World Development, Elsevier, vol. 30(8), pages 1431-1444, August.
    13. Hellman, Joel S. & Jones, Geraint & Kaufmann, daniel, 2000. ""Seize the state, seize the day": state capture, corruption, and influence in transition," Policy Research Working Paper Series 2444, The World Bank.
    14. Alexander Pivovarsky & Benedict J. Clements & Sanjeev Gupta & Erwin Tiongson, 2003. "Foreign Aid and Revenue Response," IMF Working Papers 03/176, International Monetary Fund.
    15. Michael Kremer & Seema Jayachandran, 2002. "Odious Debt," NBER Working Papers 8953, National Bureau of Economic Research, Inc.
    16. Peter S. Heller, 2005. "“Pity the Finance Ministerâ€," World Economics, World Economics, Economic & Financial Publishing, 1 Ivory Square, Plantation Wharf, London, United Kingdom, SW11 3UE, vol. 6(4), pages 69-110, October.
    17. Manuel Pastor & James Boyce, 1998. "Aid for Peace: Can International Financial Instutitions Help Prevent Conflict?," Published Studies ps2, Political Economy Research Institute, University of Massachusetts at Amherst.
    18. Howell H. Zee & Vito Tanzi, 2000. "Tax Policy for Emerging Markets," IMF Working Papers 00/35, International Monetary Fund.
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