Aid and Public Sector Behavior in Developing Countries

Posted: 26 Oct 2000

See all articles by Mark McGillivray

Mark McGillivray

United Nations - World Institute for Development Economics Research (UNU/WIDER)

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.

JEL Classification: O10

Suggested Citation

McGillivray, Mark, Aid and Public Sector Behavior in Developing Countries. Available at SSRN: https://ssrn.com/abstract=237058

Mark McGillivray (Contact Author)

United Nations - World Institute for Development Economics Research (UNU/WIDER) ( email )

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