Is foreign aid fungible? Evidence from the education and health sectors
This paper takes a fresh look at the issue of foreign aid fungibility. Unlike the bulk of existing empirical studies, I employ panel data that contain information on the specific purpose for which aid is given. This allows me to link aid given for education and health purposes to recipient public spending in these sectors. In addition, I attempt to distinguish between aid flows that are recorded on the recipient’s budget and those that are off-budget, and illustrate how a failure to differentiate between on- and off-budget aid produces biased estimates of fungibility. Sector programme aid is the measure of on-budget aid, while technical cooperation serves as a proxy for off-budget aid. In both sectors, across a range of specifications, technical cooperation leads to at most a small displacement of recipient public expenditure, implying limited fungibility for this type of aid. In static fixed effects models sector programme aid shows an almost one-for-one correlation with recipient public expenditure, again suggesting low fungibility, but this effect becomes imprecise and volatile in dynamic models estimated with system GMM.
|Date of creation:||2010|
|Contact details of provider:|| Postal: Manor Road, Oxford, OX1 3UQ|
Phone: +44-(0)1865 271084
Fax: +44-(0)1865 281447
Web page: http://www.csae.ox.ac.uk/
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.:
- Nicholas J. Cox, 2006. "Stata tip 33: Sweet sixteen: Hexadecimal formats and precision problems," Stata Journal, StataCorp LP, vol. 6(2), pages 282-283, June.
- Nicolas Depetris Chauvin & Aart Kraay, 2005. "What Has 100 Billion Dollars Worth of Debt Relief Done for Low- Income Countries?," International Finance 0510001, EconWPA.
- Arellano, Manuel, 1993. "On the testing of correlated effects with panel data," Journal of Econometrics, Elsevier, vol. 59(1-2), pages 87-97, September.
- William Gould, 2006. "Mata Matters: Precision," Stata Journal, StataCorp LP, vol. 6(4), pages 550-560, December.
- Khilji, Nasir M. & Zampelli, Ernest M., 1994. "The fungibility of U.S. military and non-military assistance and the impacts on expenditures of major aid recipients," Journal of Development Economics, Elsevier, vol. 43(2), pages 345-362, April.
- Anderson, T. W. & Hsiao, Cheng, 1982. "Formulation and estimation of dynamic models using panel data," Journal of Econometrics, Elsevier, vol. 18(1), pages 47-82, January.
When requesting a correction, please mention this item's handle: RePEc:csa:wpaper:2010-38. 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: (Richard Payne)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.