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Is foreign aid fungible ? evidence from the education and health sectors

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  • Van de Sijpe, Nicolas

Abstract

This paper adopts a new approach to the issue of foreign aid fungibility. In contrast to most existing empirical studies, panel data are employed that contain information on the specific purposes for which aid is given. This allows linking aid that is provided for education and health purposes to recipient public spending in these sectors. In addition, aid flows that are recorded on a recipient's budget are distinguished from those that are not recorded on budget, and the previous failure to differentiate between on- and off-budget aid is shown to produce biased estimates of fungibility. Sector program aid is the measure of on-budget aid, whereas technical cooperation serves as a proxy for off-budget aid. The appropriate treatment of off-budget aid leads to lower fungibility estimates than those reported in many previous studies. Specifically, in both sectors and across a range of specifications, technical cooperation, which is the largest component of total education and health aid, leads to, at most, a small displacement of recipient public expenditures.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 6346.

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Date of creation: 01 Jan 2013
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Handle: RePEc:wbk:wbrwps:6346

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Keywords: Health Monitoring&Evaluation; Gender and Health; Public Sector Expenditure Policy; Disability; Debt Markets;

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Cited by:
  1. Morrissey, Oliver, 2012. "Aid and Government Fiscal Behaviour: What Does the Evidence Say?," Working Paper Series, World Institute for Development Economic Research (UNU-WIDER) UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  2. Nicolas Van de Sijpe, 2013. "The Fungibility of Health Aid Reconsidered," Journal of Development Studies, Taylor & Francis Journals, Taylor & Francis Journals, vol. 49(12), pages 1746-1754, December.
  3. Jonathan R. W. Temple & Nicolas Van de Sijpe, 2014. "Foreign Aid and Domestic Absorption," CSAE Working Paper Series 2014-01, Centre for the Study of African Economies, University of Oxford.
  4. Aaron Batten, 2009. "How much foreign aid given to PNG has stayed within the sectors to which it has been allocated and how much has it allowed the PNG Government to free up its own resources for other spending priorities," International and Development Economics Working Papers, International and Development Economics idec09-05, International and Development Economics.
  5. Axel Dreher & Silvia Marchesi, 2013. "Information transmission and ownership consolidation in aid programs," Working Papers, University of Milano-Bicocca, Department of Economics 255, University of Milano-Bicocca, Department of Economics, revised Oct 2013.
  6. Patrick GUILLAUMONT & Laurent WAGNER, 2014. "Aid effectiveness for poverty reduction: lessons from cross-country analyses, with a special focus on vulnerable countries," Working Papers P96, FERDI.
  7. Zenthöfer, A.F., 2013. "Essays on development economics," Open Access publications from Tilburg University urn:nbn:nl:ui:12-5906745, Tilburg University.
  8. Rohen D'Aiglepierre & Laurent Wagner, 2011. "Aid and Universal Primary Education," Working Papers halshs-00552241, HAL.
  9. Aaron Batten, 2011. "Aid and Oil in Papua New Guinea: Implications for the Financing of Service Delivery," Development Policy Centre Discussion Papers, Development Policy Centre, Crawford School of Public Policy, The Australian National University 1104, Development Policy Centre, Crawford School of Public Policy, The Australian National University.

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