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The Composition of Aid and the Fiscal Sector in an Aid-Recipient Economy: A Model

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  • George Mavrotas
  • Bazoumana Ouattara

Abstract

Building on recent work in the fiscal response literature, the present paper develops a new fiscal response model, which, for the first time in the relevant literature, combines the ideas of both endogenous and disaggregated aid. We endogenized aid on the grounds that the recipient government has some influence over aid disbursements. Regarding aid disaggregation, it is argued that each of the main four categories of aid, namely project aid, programme aid, technical assistance and food aid may exert different effects on the recipient economy.

Suggested Citation

  • George Mavrotas & Bazoumana Ouattara, 2003. "The Composition of Aid and the Fiscal Sector in an Aid-Recipient Economy: A Model," WIDER Working Paper Series DP2003-11, World Institute for Development Economic Research (UNU-WIDER).
    • Handle: RePEc:unu:wpaper:dp2003-11
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    References listed on IDEAS

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    1. Mosley, Paul & Hudson, John & Horrell, Sara, 1987. "Aid, the Public Sector and the Market in Less Developed Countries," Economic Journal, Royal Economic Society, vol. 97(387), pages 616-641, September.
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    6. Franco-Rodriguez, Susana & Morrissey, Oliver & McGillivray, Mark, 1998. "Aid and the Public Sector in Pakistan: Evidence with Endogenous Aid," World Development, Elsevier, vol. 26(7), pages 1241-1250, July.
    7. White, Howard, 1994. "Foreign aid, taxes and public investment: A further comment," Journal of Development Economics, Elsevier, vol. 45(1), pages 155-163, October.
    8. Susana Franco‐Rodriguez, 2000. "Recent developments in fiscal response with an application to Costa Rica," Journal of International Development, John Wiley & Sons, Ltd., vol. 12(3), pages 429-441, April.
    9. Levy, Victor, 1987. "Anticipated Development Assistance, Temporary Relief Aid, and," Economic Journal, Royal Economic Society, vol. 97(386), pages 446-458, June.
    10. Akhter Ahmed, 1999. "Aid and Fiscal Behaviour in Developing Asia," Palgrave Macmillan Books, in: Mohammad Alauddin & Samiul Hasan (ed.), Development, Governance and the Environment in South Asia, chapter 8, pages 141-159, Palgrave Macmillan.
    11. Mark McGillivray & Oliver Morrissey, 2000. "Aid fungibility in Assessing Aid: red herring or true concern?," Journal of International Development, John Wiley & Sons, Ltd., vol. 12(3), pages 413-428, April.
    12. George Mavrotas, 2002. "Foreign aid and fiscal response: Does aid disaggregation matter?," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 138(3), pages 534-559, September.
    13. Heller, Peter S, 1975. "A Model of Public Fiscal Behavior in Developing Countries: Aid, Investment, and Taxation," American Economic Review, American Economic Association, vol. 65(3), pages 429-445, June.
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    15. Binh, Tran-Nam & McGillivray, Mark, 1993. "Foreign aid, taxes and public investment A comment," Journal of Development Economics, Elsevier, vol. 41(1), pages 173-176, June.
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    Cited by:

    1. 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.
    2. George Mavrotas, 2005. "Aid heterogeneity: looking at aid effectiveness from a different angle," Journal of International Development, John Wiley & Sons, Ltd., vol. 17(8), pages 1019-1036.
    3. George Mavrotas & Bazoumana Ouattara, 2003. "Aid Disaggregation, Endogenous Aid and the Public Sector in Aid-Recipient Economies: Evidence from Côte d'Ivoire," WIDER Working Paper Series DP2003-15, World Institute for Development Economic Research (UNU-WIDER).
    4. George Mavrotas, 2003. "The International Finance Facility: The UK HM Treasury-DFID Proposal to Increase External Finance to Developing Countries," WIDER Working Paper Series DP2003-79, World Institute for Development Economic Research (UNU-WIDER).
    5. George Mavrotas, 2003. "Which Types of Aid Have the Most Impact?," WIDER Working Paper Series DP2003-85, World Institute for Development Economic Research (UNU-WIDER).

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