Foreign aid and fiscal behavior in a bounded rationality model: Different policy regimes
We examine how the source of foreign aid affects the composition of the recipient government's spending. Does the source of aid - bilateral or multilateral - influence recipient policy-makers' choice between development and nondevelopment expenditure? We depart from previous literature by introducing strong asymmetries in policy-makers' preferences. With the financial constraints set by foreign aid and domestic revenues, this formalization allows us to model and estimate the fiscal behavior of government policy-makers in the presence of foreign aid.
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Volume (Year): 24 (1999)
Issue (Month): 1 ()
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