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Aid and Public Sector Behavior in Developing Countries

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  • McGillivray, Mark

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. Copyright 2000 by Blackwell Publishing Ltd

Suggested Citation

  • McGillivray, Mark, 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:156-63
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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. Raul FUENTES, 2003. "Foreign Aid : Where Your Money Could Be ? An Optimal Two-Sector Growth Model Out Lining a Simple Answer," LIDAM Discussion Papers IRES 2004003, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    3. Mark McGillivray, 2003. "Aid Effectiveness and Selectivity: Integrating Multiple Objectives into Aid Allocations," WIDER Working Paper Series DP2003-71, World Institute for Development Economic Research (UNU-WIDER).
    4. Ouattara, B., 2006. "Foreign aid and government fiscal behaviour in developing countries: Panel data evidence," Economic Modelling, Elsevier, vol. 23(3), pages 506-514, May.
    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. 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.
    7. Hassan, Sherif, 2016. "Seventy Years of Official Development Assistance: Reflections on the Working Age Population," MPRA Paper 74835, University Library of Munich, Germany.
    8. Mark McGillivray, 2009. "Aid, Economic Reform, and Public Sector Fiscal Behavior in Developing Countries," Review of Development Economics, Wiley Blackwell, vol. 13(s1), pages 526-542, August.
    9. 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.
    10. Rabia Butt & Attiya Yasmin Javid, 2013. "Foreign Aid and the Fiscal Behaviour of Government of Pakistan," PIDE-Working Papers 2013:96, Pakistan Institute of Development Economics.
    11. Feeny, Simon, 2007. "Foreign Aid and Fiscal Governance in Melanesia," World Development, Elsevier, vol. 35(3), pages 439-453, March.
    12. 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).
    13. 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.
    14. B Ouattara, 2004. "Modelling the Long Run Determinants of Private Investment in Senegal," Economics Discussion Paper Series 0413, Economics, The University of Manchester.
    15. Bazoumana Ouattara, 2006. "Aid, debt and fiscal policies in Senegal," Journal of International Development, John Wiley & Sons, Ltd., vol. 18(8), pages 1105-1122.
    16. George Mavrotas, 2009. "Introduction: Development Aid-Theory, Policies, and Performance," Review of Development Economics, Wiley Blackwell, vol. 13(s1), pages 373-381, August.
    17. Mark McGillivray & Bazoumana Ouattara, 2003. "Aid, Debt Burden and Government Fiscal Behaviour: A New Model Applied to Côte d'Ivoire," WIDER Working Paper Series DP2003-33, World Institute for Development Economic Research (UNU-WIDER).
    18. B Ouattara, 2004. "Does Aid Promote Fiscal Indiscipline? Evidence from Dynamic Panel Model," Economics Discussion Paper Series 0407, Economics, The University of Manchester.
    19. Mohammadou Nourou, 2014. "Foreign Aid And Development: Looking Beyond The Growth Effect," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 39(4), pages 99-115, December.
    20. Kar, Ashim Kumar, 2016. "Aid and Human Development: Is There A Role for Good Policy Environment?," MPRA Paper 95433, University Library of Munich, Germany, revised 2018.
    21. 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.
    22. repec:oup:jafrec:v:32:y:2022:i:1:p:26-51. is not listed on IDEAS
    23. 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.

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