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Aid and Public Sector Behavior in Developing Countries

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  • McGillivray, Mark

Abstract

This paper analyzes developing-country public-sector fiscal behavior. It is concerned specifically with how aid inflows affect various categories of revenue and expenditure. An econometric model is developed, which differs from those used in previous studies by allowing domestic borrowing to finance both capital and recurrent expenditure. Structural and reduced-form equations are derived and estimated using 1956-95 time-series data for Pakistan. Results indicate that aid is allocated mainly to investment, is positively associated with both investment and consumption expenditure, and has no final impact on taxation. Copyright 2000 by Blackwell Publishing Ltd

Suggested Citation

  • McGillivray, Mark, 2000. "Aid and Public Sector Behavior in Developing Countries," Review of Development Economics, Wiley Blackwell, vol. 4(2), pages 156-163, June.
  • Handle: RePEc:bla:rdevec:v:4:y:2000:i:2:p:156-63
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    Citations

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    Cited by:

    1. Raul, FUENTES, 2003. "Foreign Aid : Where Your Money Could Be ? An Optimal Two-Sector Growth Model Out Lining a Simple Answer," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2004003, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    2. B Ouattara, 2004. "Modelling the Long Run Determinants of Private Investment in Senegal," The School of Economics Discussion Paper Series 0413, Economics, The University of Manchester.
    3. Bazoumana Ouattara, 2006. "Aid, debt and fiscal policies in Senegal," Journal of International Development, John Wiley & Sons, Ltd., vol. 18(8), pages 1105-1122.
    4. McGillivray, Mark, 2003. "Aid Effectiveness and Selectivity: Integrating Multiple Objectives into Aid Allocations," WIDER Working Paper Series 071, World Institute for Development Economic Research (UNU-WIDER).
    5. George Mavrotas, 2009. "Introduction: Development Aid-Theory, Policies, and Performance," Review of Development Economics, Wiley Blackwell, vol. 13(s1), pages 373-381, August.
    6. McGillivray, Mark & Ouattara, Bazoumana, 2003. "Aid, Debt Burden and Government Fiscal Behaviour: A New Model Applied to C.te d'Ivoire," WIDER Working Paper Series 033, World Institute for Development Economic Research (UNU-WIDER).
    7. Ouattara, B., 2006. "Foreign aid and government fiscal behaviour in developing countries: Panel data evidence," Economic Modelling, Elsevier, vol. 23(3), pages 506-514, May.
    8. Agénor, Pierre-Richard & Bayraktar, Nihal & El Aynaoui, Karim, 2008. "Roads out of poverty? Assessing the links between aid, public investment, growth, and poverty reduction," Journal of Development Economics, Elsevier, vol. 86(2), pages 277-295, June.
    9. B Ouattara, 2004. "Does Aid Promote Fiscal Indiscipline? Evidence from Dynamic Panel Model," The School of Economics Discussion Paper Series 0407, Economics, The University of Manchester.
    10. Mohammadou Nourou, 2014. "Foreign Aid And Development: Looking Beyond The Growth Effect," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 39(4), pages 99-115, December.
    11. Fuentes, Raúl, 2005. "Aid, Policies and Growth: A Non-Canonical Alternative for solving This Puzzle," Proceedings of the German Development Economics Conference, Kiel 2005 14, Verein für Socialpolitik, Research Committee Development Economics.
    12. Hassan, Sherif, 2016. "Seventy Years of Official Development Assistance: Reflections on the Working Age Population," MPRA Paper 74835, University Library of Munich, Germany.
    13. Mark McGillivray, 2009. "Aid, Economic Reform, and Public Sector Fiscal Behavior in Developing Countries," Review of Development Economics, Wiley Blackwell, vol. 13(s1), pages 526-542, August.
    14. Rabia Butt & Attiya Yasmin Javid, 2013. "Foreign Aid and the Fiscal Behaviour of Government of Pakistan," PIDE-Working Papers 2013:96, Pakistan Institute of Development Economics.
    15. repec:bla:afrdev:v:29:y:2017:i:3:p:416-428 is not listed on IDEAS
    16. Feeny, Simon, 2007. "Foreign Aid and Fiscal Governance in Melanesia," World Development, Elsevier, vol. 35(3), pages 439-453, March.
    17. Mavrotas, George, 2003. "The International Finance Facility: The UK HM Treasury-DFID Proposal to Increase External Finance to Developing Countries," WIDER Working Paper Series 079, World Institute for Development Economic Research (UNU-WIDER).
    18. World Bank, 2007. "Niger - Accelerating Growth and Achieving the Millennium Development Goals : Diagnosis and the Policy Agenda," World Bank Other Operational Studies 7658, The World Bank.

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