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Is Foreign Aid Fungible? The Case of Indonesia

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  • Pack, Howard
  • Pack, Janet Rothenberg

Abstract

This paper considers whether foreign aid given for specific categories of expenditure is fungible among them and whether aid reduces tax effort by the recipient government. Models developed to analyze the fiscal relations among different levels of government in the United States are applied to analysis of the impact of foreign aid. Econometric analysis of data for Indonesia reveals that aid is largely spent as the donors intended, that aid does not lead to a reduction in tax effort, and that aid is not diverted to nondevelopment current expenditures. Copyright 1990 by Royal Economic Society.

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  • Pack, Howard & Pack, Janet Rothenberg, 1990. "Is Foreign Aid Fungible? The Case of Indonesia," Economic Journal, Royal Economic Society, vol. 100(399), pages 188-194, March.
    • Handle: RePEc:ecj:econjl:v:100:y:1990:i:399:p:188-94
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