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Aid and Public Sector Behavior in Developing Countries

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  • Mark McGillivray

Abstract

This paper analyzes developing‐country public‐sector fiscal behavior. It is concerned specifically with how aid inflows affect various categories of revenue and expenditure. An econometric model is developed, which differs from those used in previous studies by allowing domestic borrowing to finance both capital and recurrent expenditure. Structural and reduced‐form equations are derived and estimated using 1956–95 time‐series data for Pakistan. Results indicate that aid is allocated mainly to investment, is positively associated with both investment and consumption expenditure, and has no final impact on taxation.

Suggested Citation

  • Mark McGillivray, 2000. "Aid and Public Sector Behavior in Developing Countries," Review of Development Economics, Wiley Blackwell, vol. 4(2), pages 156-163, June.
    • Handle: RePEc:bla:rdevec:v:4:y:2000:i:2:p:156-163
    DOI: 10.1111/1467-9361.00084
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    Cited by:

    1. Loujaina Abdelwahed, 2023. "Fiscal Responses to Foreign Aid: Does the Permanence of Aid Matter?," Journal of African Economies, Centre for the Study of African Economies, vol. 32(1), pages 26-51.
    2. 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.
    3. Barthélémy Biao, 2017. "Analyse des effets de l'instabilité de l'aide publique au développement (APD) sur la croissance économique dans les pays africains," African Development Review, African Development Bank, vol. 29(3), pages 416-428, September.
    4. repec:oup:jafrec:v:32:y:2022:i:1:p:26-51. is not listed on IDEAS
    5. Mark McGillivray, 2003. "Efficacité de l'aide et sélectivité : vers un concept élargi," Revue d’économie du développement, De Boeck Université, vol. 11(4), pages 43-62.
    6. Sherif M. Hassan, 2020. "Revisiting the Development Impact of Sectorally Disaggregated Foreign Aid," Poverty & Public Policy, John Wiley & Sons, vol. 12(2), pages 123-149, June.
    7. Fuentes, Raúl, 2005. "Aid, Policies and Growth: A Non-Canonical Alternative for solving This Puzzle," Proceedings of the German Development Economics Conference, Kiel 2005 14, Verein für Socialpolitik, Research Committee Development Economics.
    8. World Bank, 2007. "Niger - Accelerating Growth and Achieving the Millennium Development Goals : Diagnosis and the Policy Agenda," World Bank Publications - Reports 7658, The World Bank Group.
    9. Hassan, Sherif, 2016. "Seventy Years of Official Development Assistance: Reflections on the Working Age Population," MPRA Paper 74835, University Library of Munich, Germany.

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