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Is foreign aid fungible ? evidence from the education and health sectors

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  • Van de Sijpe, Nicolas

Abstract

This paper adopts a new approach to the issue of foreign aid fungibility. In contrast to most existing empirical studies, panel data are employed that contain information on the specific purposes for which aid is given. This allows linking aid that is provided for education and health purposes to recipient public spending in these sectors. In addition, aid flows that are recorded on a recipient's budget are distinguished from those that are not recorded on budget, and the previous failure to differentiate between on- and off-budget aid is shown to produce biased estimates of fungibility. Sector program aid is the measure of on-budget aid, whereas technical cooperation serves as a proxy for off-budget aid. The appropriate treatment of off-budget aid leads to lower fungibility estimates than those reported in many previous studies. Specifically, in both sectors and across a range of specifications, technical cooperation, which is the largest component of total education and health aid, leads to, at most, a small displacement of recipient public expenditures.

Suggested Citation

  • Van de Sijpe, Nicolas, 2013. "Is foreign aid fungible ? evidence from the education and health sectors," Policy Research Working Paper Series 6346, The World Bank.
  • Handle: RePEc:wbk:wbrwps:6346
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    References listed on IDEAS

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    1. Nicolas Depetris Chauvin & Aart Kraay, 2005. "What Has 100 Billion Dollars Worth of Debt Relief Done for Low- Income Countries?," International Finance 0510001, EconWPA.
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    3. 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.
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    Cited by:

    1. Temple, Jonathan & Van de Sijpe, Nicolas, 2017. "Foreign aid and domestic absorption," Journal of International Economics, Elsevier, vol. 108(C), pages 431-443.
    2. Axel Dreher & Sarah Langlotz & Silvia Marchesi, 2017. "Information Transmission And Ownership Consolidation In Aid Programs," Economic Inquiry, Western Economic Association International, vol. 55(4), pages 1671-1688, October.
    3. Patrick Guillaumont & Laurent Wagner, 2014. "Aid Effectiveness for Poverty Reduction: Lessons from Cross‑country Analyses, with a Special Focus on Vulnerable Countries," Revue d’économie du développement, De Boeck Université, vol. 22(HS01), pages 217-261.
    4. Axel Dreher & Steffen Lohmann, 2015. "Aid and growth at the regional level," Oxford Review of Economic Policy, Oxford University Press, vol. 31(3-4), pages 420-446.
    5. Dreher, Axel & Fuchs, Andreas & Hodler, Roland & Parks, Bradley C. & Raschky, Paul A. & Tierney, Michael J., 2015. "Aid on Demand: African Leaders and the Geography of China's Foreign Assistance," CEPR Discussion Papers 10704, C.E.P.R. Discussion Papers.
    6. d’Aiglepierre, Rohen & Wagner, Laurent, 2013. "Aid and Universal Primary Education," Economics of Education Review, Elsevier, vol. 37(C), pages 95-112.
    7. repec:bla:rdevec:v:21:y:2017:i:3:p:627-663 is not listed on IDEAS
    8. Maiga, Eugenie W.H., 2014. "Does foreign aid in education foster gender equality in developing countries?," WIDER Working Paper Series 048, World Institute for Development Economic Research (UNU-WIDER).
    9. Ssozi, John & Amlani, Shirin, 2015. "The Effectiveness of Health Expenditure on the Proximate and Ultimate Goals of Healthcare in Sub-Saharan Africa," World Development, Elsevier, vol. 76(C), pages 165-179.
    10. Dreher, Axel & Fuchs, Andreas & Langlotz, Sarah, 2018. "The Effects of Foreign Aid on Refugee Flows," GLO Discussion Paper Series 195, Global Labor Organization (GLO).
    11. Martínez Álvarez, Melisa & Borghi, Josephine & Acharya, Arnab & Vassall, Anna, 2016. "Is Development Assistance for Health fungible? Findings from a mixed methods case study in Tanzania," Social Science & Medicine, Elsevier, vol. 159(C), pages 161-169.
    12. Sarah Langlotz & Niklas Potrafke, 2016. "Does Development Aid Increase Military Expenditure?," CESifo Working Paper Series 6088, CESifo Group Munich.
    13. Aaron Batten, 2011. "Aid and Oil in Papua New Guinea: Implications for the Financing of Service Delivery," Development Policy Centre Discussion Papers 1104, Development Policy Centre, Crawford School of Public Policy, The Australian National University.
    14. Aaron Batten, 2009. "How much foreign aid given to PNG has stayed within the sectors to which it has been allocated and how much has it allowed the PNG Government to free up its own resources for other spending priorities," International and Development Economics Working Papers idec09-05, International and Development Economics.
    15. Morrissey, Oliver, 2015. "Aid and Government Fiscal Behavior: Assessing Recent Evidence," World Development, Elsevier, vol. 69(C), pages 98-105.
    16. Łukasz Marć, 2017. "The Impact of Aid on Total Government Expenditures: New Evidence on Fungibility," Review of Development Economics, Wiley Blackwell, vol. 21(3), pages 627-663, August.
    17. Nicolas Van de Sijpe, 2013. "The Fungibility of Health Aid Reconsidered," Journal of Development Studies, Taylor & Francis Journals, vol. 49(12), pages 1746-1754, December.
    18. Cockx, Lara & Francken, Nathalie, 2016. "Natural resources: A curse on education spending?," Energy Policy, Elsevier, vol. 92(C), pages 394-408.
    19. repec:unu:wpaper:wp2012-01 is not listed on IDEAS
    20. Nicolas Van de Sijpe, 2013. "The Fungibility of Health Aid Reconsidered," Journal of Development Studies, Taylor & Francis Journals, vol. 49(12), pages 1746-1754, December.

    More about this item

    Keywords

    Health Monitoring&Evaluation; Gender and Health; Public Sector Expenditure Policy; Disability; Debt Markets;

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • F35 - International Economics - - International Finance - - - Foreign Aid
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • O23 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Fiscal and Monetary Policy in Development

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