Aid, Economic Reform, and Public Sector Fiscal Behavior in Developing Countries

Mark McGillivray

Review of Development Economics, 2009, vol. 13, issue s1, pages 526-542

Abstract: This paper looks at interactions between foreign development aid, economic reform, and public sector fiscal behavior. It proposes a model of the public sector fiscal response to aid inflows, which allows for changes in structural relationships due to an exogenously imposed program of economic reform. This model is applied to 1960-99 time series data for the Philippines, which embarked on an IMF- and World Bank-funded structural adjustment program in 1980. Estimates of structural and reduced-form equations paint a dismal picture of the effectiveness of foreign aid to, and the structural adjustment program in, the Philippines so far as fiscal impacts are concerned. Both bilateral and multilateral aid inflows, and the presence of an economic reform program, are associated with decreases in public fixed capital expenditure, decreases in taxation and other recurrent revenue, and decreases in public sector saving. Multilateral aid also appears to be highly fungible. Copyright 2009 UNU-WIDER. Journal compilation 2009 Blackwell Publishing Ltd.

Date: 2009

Downloads: (external link)
http://www.blackwell-synergy.com/doi/abs/10.1111/j.1467-9361.2009.00505.x link to full text (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:bla:rdevec:v:13:y:2009:i:s1:p:526-542

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=1363-6669

Access Statistics for this article

Review of Development Economics is edited by E. Kwan Choi

More articles in Review of Development Economics from Blackwell Publishing
Series data maintained by Christopher F. Baum ().