Is Foreign Aid Fungible? Evidence from the Education and Health Sectors

Van de Sijpe, Nicolas

Oxford University Press on behalf of the World Bank

关键词: aid effectiveness;    birth rate;    economic growth;    expenditure;    female;   

DOI  :  10.1093/wber/lhs023

学科分类：社会科学、人文和艺术（综合）

来源: World Bank Open Knowledge Repository

【 摘 要 】

This paper adopts a new approach to the issue of foreign aid fungibility. Unlike most existing empirical studies, I employ panel data that contain information on the specific purposes for which aid is given. This approach enables me to link aid that is provided for education and health purposes to recipient public spending in these sectors. In addition, I distinguish between aid flows that are recorded on a recipient's budget and those that are not recorded, and I illustrate how the previous failure to differentiate between on- and off-budget aid produces 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. I show that the appropriate treatment of off-budget aid leads to lower fungibility estimates than those reported in many previous studies. Specifically, I find that 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.