Is Foreign Aid Fungible? Evidence from the Education and Health Sectors
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World Bank, Washington, DC
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This paper adopts a new approach to the
issue of foreign aid fungibility. In contrast to most
existing empirical studies, panel data are employed that
contain information on the specific purposes for which aid
is given. This allows linking aid that is provided for
education and health purposes to recipient public spending
in these sectors. In addition, aid flows that are recorded
on a recipient's budget are distinguished from those
that are not recorded on budget, and the previous failure to
differentiate between on- and off-budget aid is shown to
produce biased estimates of fungibility. Sector program aid
is the measure of on-budget aid, whereas technical
cooperation serves as a proxy for off-budget aid. The
appropriate treatment of off-budget aid leads to lower
fungibility estimates than those reported in many previous
studies. Specifically, in both sectors and across a range of
specifications, technical cooperation, which is the largest
component of total education and health aid, leads to, at
most, a small displacement of recipient public expenditures.
Palabras clave
ACCOUNTING, ADMINISTRATIVE COSTS, AID, ALLOCATION, ARTICLE, BIRTH RATE, BOND, BUDGET CONSTRAINT, BUDGET DOCUMENTS, BUDGET PROCESS, BUREAUCRATIC QUALITY, BUYBACKS, CAPACITY BUILDING, CD, CONDITIONALITY, COUNTRY ECONOMISTS, COUNTRY RISK, CREDITOR, DATA ANALYSIS, DATA AVAILABILITY, DEBT, DEBT CONVERSIONS, DEBT FORGIVENESS, DEBT RELIEF, DEBT SERVICE, DEVELOPING COUNTRIES, DISBURSEMENT, DISBURSEMENTS, DOMESTIC REVENUE, ECONOMIC DEVELOPMENT, ECONOMIC GROWTH, ECONOMIC POLICY, ECONOMIES OF SCALE, EDUCATION EXPENDITURES, EDUCATION SPENDING, EQUIPMENT, EXCLUSION, EXPENDITURE, EXPENDITURE CATEGORIES, EXTERNAL DEBT, EXTERNAL FINANCING, FACE VALUE, FEMALE, FINANCES, FISCAL AFFAIRS, FISCAL BEHAVIOR, FISCAL FEDERALISM, FISCAL POLICY, FUNGIBILITY, FUNGIBILITY OF AID, FUNGIBLE, GENERAL BUDGET SUPPORT, GLOBAL DEVELOPMENT FINANCE, GLOBALIZATION, GOVERNMENT BUDGETS, GOVERNMENT CAPACITY, GOVERNMENT EXPENDITURE, GOVERNMENT EXPENDITURES, GOVERNMENT FINANCE, GOVERNMENT FINANCE STATISTICS, GOVERNMENT SPENDING, GROWTH RATE, HEALTH EXPENDITURE, HEALTH EXPENDITURES, HEALTH SECTOR, HEALTH SERVICES, HEALTH SPENDING, HOSPITALS, HUMAN DEVELOPMENT, INCLUSION, INSTRUMENT, INTERGOVERNMENTAL GRANTS, INTERNATIONAL BANK, INTERNATIONAL COMPARISONS, INTERNATIONAL DEVELOPMENT, INVESTMENT PROJECTS, LEVEL OF DEBT, LOCAL GOVERNMENT, LONG-TERM EXTERNAL DEBT, LOWER TAXES, MARGINAL EFFECTS, MEDICINES, MILITARY EXPENDITURES, MINISTRY OF FINANCE, MONETARY FUND, MORTALITY, NET BORROWING, NET PRESENT VALUE, POLITICAL ECONOMY, POLITICAL RISK, POLLUTION, POSITIVE COEFFICIENT, PRESENT VALUE, PROGRAMS, PROVISION OF GOODS, PUBLIC DEBT, PUBLIC EDUCATION, PUBLIC EXPENDITURE, PUBLIC EXPENDITURES, PUBLIC HEALTH, PUBLIC INVESTMENTS, PUBLIC POLICY, PUBLIC SECTOR, PUBLIC SPENDING, RULE OF LAW, SECTORAL ALLOCATION, SECTORAL DISTRIBUTION, SECTORAL EXPENDITURE, SECTORAL GRANTS, SOCIAL EXPENDITURE, SOCIAL EXPENDITURES, SOCIAL POLICY, SOCIETIES, SOCIETY, STD, STRUCTURAL ADJUSTMENT, TAX, TAX BASES, TAX REVENUE, TOTAL DEBT, TOTAL EXPENDITURES, TRANSPORTATION, TREASURIES, TYPES OF EXPENDITURES, UNCERTAINTY, UTILITY FUNCTION, WORTH