Aid and Public Finance: A Missing Link?
The present consensus in the literature is that foreign aid does not have the desired positive effects on economic development. This is due in great part to poorly performing public institutions in recipient countries. In order to understand better the causes of this undesirable phenomenon, we examine the relationship between multilateral foreign aid flows and recipient countries’ public finance systems. We construct a new indicator to assess the quality of public finance, the Public Finance Institutions Quality (PFIQ) Index. For our panel of 86 countries, we find that multilateral aid flows have a negative impact on recipient country PFIQ score, whereas exogenous improvements in public finance seem to attract more aid. These results provide insight into the “black box” of governance: failure to turn aid receipts into desired results seems partly attributable to multilateral aid, in its present form, not being suited to improving a country’s public finance institutions. However, international donor organisations do seem to reward exogenous improvements in quality and reliability of public finance systems. Copyright International Atlantic Economic Society 2010
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 38 (2010)
Issue (Month): 2 (June)
|Contact details of provider:|| Postal: Suite 650, International Tower, 229 Peachtree Street, N.E., Atlanta, GA 30303|
Phone: (404) 965-1555
Fax: (404) 965-1556
Web page: http://springerlink.metapress.com/link.asp?id=112055
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Alesina, Alberto & Weder, Beatrice, 2002.
"Do Corrupt Governments Receive Less Foreign Aid?,"
4553011, Harvard University Department of Economics.
- Dollar, David & Alesina, Alberto, 2000.
"Who Gives Foreign Aid to Whom and Why?,"
4553020, Harvard University Department of Economics.
- Boone, Peter, 1996. "Politics and the effectiveness of foreign aid," European Economic Review, Elsevier, vol. 40(2), pages 289-329, February.
- William Easterly & Ross Levine & David Roodman, 2004. "Aid, Policies, and Growth: Comment," American Economic Review, American Economic Association, vol. 94(3), pages 774-780, June.
- Van Rijckeghem, Caroline & Weder, Beatrice, 2001. "Bureaucratic corruption and the rate of temptation: do wages in the civil service affect corruption, and by how much?," Journal of Development Economics, Elsevier, vol. 65(2), pages 307-331, August.
- Afonso, António & Ebert, Werner & Schuknecht, Ludger & Thöne, Michael, 2005. "Quality of public finances and growth," Working Paper Series 0438, European Central Bank.
When requesting a correction, please mention this item's handle: RePEc:kap:atlecj:v:38:y:2010:i:2:p:217-235. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla)or (Rebekah McClure)
If references are entirely missing, you can add them using this form.