Aid and public sector fiscal behaviour in failing states

Simon Feeny and Mark McGillivray

Economic Modelling, 2010, vol. 27, issue 5, 1006-1016

Abstract: This paper looks at interactions between foreign aid and the public sector in developing countries, especially those considered to be fragile or failing states. A model is proposed which employs actual budgetary appropriations and revenue estimates (rather than estimated target variables) and allows for asymmetric preferences. Variants of the model are estimated using time-series data for Papua New Guinea (PNG). PNG is classified as a fragile state by the international community owing to perceived policy and institutional inadequacies. Results obtained suggest that foreign aid increases consumption and investment expenditures and decreases tax revenues and the level of borrowing.

Keywords: Foreign; aid; Taxes; Public; spending; Fungibility; Fragile; states; Failing; states; Papua; New; Guinea (search for similar items in EconPapers)
Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

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Related works:
Working Paper: Aid and Public Sector Fiscal Behaviour in Failing States (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:27:y:2010:i:5:p:1006-1016

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