Are debt repayment incentives undermined by foreign aid?

Christian Bjørnskov and Philipp Schröder

Journal of Comparative Economics, 2013, vol. 41, issue 4, 1073-1091

Abstract: This paper investigates the effects of inflows of foreign aid on the debt repayment behavior of developing countries. The paper first delineates the overall incentives to committing to timely debt repayment in a war of attrition-type model. A set of panel estimates including 93 developing countries shows that foreign aid is strongly negatively associated with repayment incentives. The findings pertain to both total debt service and service on publically guaranteed debt. A set of conditional estimates suggest that the main findings generalize to the majority of developing countries.

Keywords: Foreign aid; External debt; Debt service; Political economy (search for similar items in EconPapers)
JEL-codes: O15 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (3)

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Working Paper: Are Debt Repayment Incentives Undermined by Foreign Aid? (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jcecon:v:41:y:2013:i:4:p:1073-1091

DOI: 10.1016/j.jce.2013.04.004

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