Aid and Government Fiscal Behavior: Assessing Recent Evidence

Oliver Morrissey

109 citations0/0 files storedWorld Development

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International Development and Aid Local Government Finance and Decentralization Fiscal Policies and Political Economy

Abstract

This paper reviews evidence published in the last 10 years that has added to our understanding of the effects of aid on government spending and tax effort in recipient countries, with a discussion of when (general) budget support is a fiscally efficient aid modality. Three generalizations are permitted by the evidence: aid finances government spending; the extent to which aid is fungible is over-stated and even where it is fungible this does not appear to make the aid less effective; and there is no systematic effect of aid on tax effort. Beyond these conclusions effects are country-specific.

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References

1998Assessing aid - what works, what doesn't, and why 1999Assessing Aid: What Works, What Doesn't, and Why 2005Aid and growth in Sub‐Saharan Africa: accounting for transmission mechanisms 2003Does Foreign Aid Promote the Expansion of Government?2004Does Foreign Aid Promote the Expansion of Government?2005Aid, Government Expenditure, and Aggregate Welfare 2003Foreign Aid and Revenue Response 2009Aid and tax revenue: Signs of a positive effect since the 1980s

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