Foreign Aid Receipts Research Articles

Nexus between Fiscal Discipline and the Budget Process in Africa: Evidence from Nigeria

This paper examined the nexus between fiscal discipline and the budget process in Nigeria over the period from 1990 to 2020. Findings showed that the level of fiscal discipline in Nigeria as measured by two proxies of fiscal deficit gap and public debt gap is more enhanced under zero-based budgeting than under current incremental budgeting system. The study also established that civilian administrations are more prone to fiscal indiscipline relative to military dispensations. The paper also revealed the significant role of net foreign aid receipts in significantly narrowing fiscal deficit and public debt gaps in the short-run and long-run, respectively, as well as noted the significant widening impact of an increasing government size on the public debt gap in the long run. The study recommends, among others, the urgent need for the Nigerian government to restore fiscal discipline in public affairs through a reversion to zero-based budgeting system.

Governance and tax revenue: does foreign aid matter?

This study seeks to explores the relationship among governance, foreign aid, and tax revenue. A common notion on governance is that it is a multifaceted factor, it may affect from other factor that is foreign aid. Foreign aid can hamper the governance situation and thus can reduce tax collection. To test these theoretical assumptions, we collected the numerical data from Asian economies for the years 2001–2019 and employed the panel FMOLS (fully modified ordinary least square) test to estimate the regression. The empirical findings first reveal that governance and foreign aid have a positive association with tax revenue in the long run. However, a negative trend in tax collection was observed following the interaction of foreign aid and governance. Foreign aid deteriorates the governance situation, which has a negative spillover impact on tax revenue. Our empirical analysis suggests that policy officials should focus on exercising governance and foreign aid effectiveness to meet the objective of more tax collection. Points for practitioners Policy officials should focus on better governance exercises. They should carefully decide on the volume of foreign aid receipts. However, if it becomes necessary to receive foreign aid, then they should focus on aid effectiveness. Such steps can benefit the practitioners to collect more tax.

Foreign aid and growth nexus: empirical evidence from South Asian countries

PurposeThe purpose of this paper is to empirically examine the effectiveness of foreign aid in improving economic growth prospects in the South Asian region from 1996 to 2017.Design/methodology/approachA sample of eight South Asian countries for the period 1996–2017 is being considered for this study. This study uses various econometrics tools such as Pedroni and Johansen–Fisher panel cointegration test, panel fully modified ordinary least square and panel dynamic ordinary least square (PDOLS) to ascertain the long-run and short-run dynamics among the variables under consideration.FindingsThe empirical results found that long-run, as well as the short-run relationship, exist among foreign aid, economic growth, investment, financial deepening, price stability and trade openness of the South Asian economies. The authors also found unidirectional causality running from foreign aid to economic growth. Both the long-run relationship as well as short-run causality between foreign aid and economic growth is unequivocally positive.Originality/valueThis study uses a dynamic macroeconomic modeling framework to assess the impact of aid flows on economic growth in South Asian economies. Taking into account the diversity of level of growth experienced by the eight countries in the Asian region, this study uses an appropriate regression technique, i.e. PDOLS whose results are robust. Therefore, the policymakers in these countries are well-advised to implement suitable policy measures to ensure optimum utilization of foreign capital resources garnered by way of receipt of foreign aid and build on for stronger future economic growth.

Foreign Aid and Undeserved Credit Claiming

AbstractPoliticians in developing countries misuse foreign aid to get reelected by fiscally manipulating foreign aid resources or domestic budgets. Our article suggests another mechanism that does not require politicians to have any control over foreign aid in order to make use of it for electoral purposes: undeserved credit claiming. We analyze the conditions under which local politicians can undeservedly take credit for the receipt of foreign aid and thereby boost their chances of reelection. We theorize that politicians can employ a variety of techniques to claim credit for development aid even when they have little or no influence on its actual allocation. Using a subnational World Bank development program in the Philippines, we demonstrate that credit claiming is an important strategy to exploit foreign aid inflows and that the political effects of aid can persist even when projects are designed to minimize the diversion or misuse of funds.

Putting the Challenge of Achieving International Education Goals into Context: An Examination of the Institutional Determinants of Educational Attainment

This study provides a multidisciplinary approach to understanding the challenge of achieving international educational goals by examining the political, economic, and cultural forces working to expand education globally. I analyze the effect of domestic and global institutions, specifically democracy, global economic integration, and receipt of foreign aid on the expansion of educational attainment for 128 countries from 1960 to 2010. I use random coefficient growth models to find that past levels of education attainment, country wealth, and a growing rural population have significant within-country effects on education attainment expansion. Democratic institutions, integration in the world economy, and country wealth have positive between-country effects on attainment, while population growth and larger rural populations have negative effects. Foreign aid does not have any significant effect on education attainment in developing countries. By synthesizing theoretical frameworks across disciplines, this study provides a rich and nuanced examination of the forces that drive states’ expansion of education.

Services for people with communication disability in Fiji: barriers and drivers of change

The World Health Organization's World report on disability calls upon all nations to 'remove the barriers which prevent [people with disabilities] from participating in their communities; getting a quality education, finding decent work, and having their voices heard' (p. 5). People with communication disability (PWCD), as a consequence of their atypical communication, may be more likely to be excluded from society, and denied their basic human rights, than other people with disability. Fiji, a multicultural and multilingual nation in the south-western Pacific Ocean, has limited services for PWCD. Service providers in Fiji include disability care workers, special education teachers, traditional healers, and a small number of visiting volunteer speech-language pathologists. This paper outlines the historical and current barriers to, and drivers of change for, service development for PWCD in Fiji. Five barriers to service development for PWCD in Fiji were identified. (1) A major structural barrier is the small population size to develop appropriate infrastructure including professional education programs. (2) Geographical barriers include the dispersed geography across 300 islands, low population density, the rural-urban divide, and risk of disaster from cyclones and flooding. (3) Linguistic diversity, while culturally important, can present a barrier to the provision of quality services that are available in the languages spoken by PWCD. (4) Cultural barriers include historical political instability, although Fiji has become more stable due to the recent democratic elections. The social climate affects development of services that are appropriate for different dominant cultural groups. (5) Financial barriers include low gross domestic product, low financial security and low human development index; however, the financial outlook for Fiji is steadily improving due to the change in political stability. Three levels of drivers of change were identified. Macro-level drivers included Fiji's endorsement of international policy and increased globalisation (eg tourism). Meso-level drivers of change included receipt of foreign aid and support from international non-government organisations, development of disability-inclusive legislation and policy within Fiji, and strengthening of government policies that support disabled people's organisations. Micro-level drivers of change included establishment of disabled people's organisations by consumers, adoption of disability-inclusive policy and procedures by service providers, and changes in the perceptions of disability within the general community. Fijian prevalence data confirms that there is an underserved population of PWCD in need of specialist services. Significant advocacy work in the disability field by Fijian and international disabled people's organisations has led to the Fiji government signing international policy (eg Convention on the Rights of Peoples with Disabilities), inclusion of disability rights in national legislation (eg 2013 Constitution of Fiji Islands) and localised policy and practice documentation (eg inclusive education policy by the Fiji Islands Ministry of Education). Continued service development is required if Fijians with communication disability are to have their needs met. The drivers of change at all levels are positioned well to overcome current barriers to change; however, a coordinated approach including macro-, meso-, and micro-level drivers is required to ensure the future development of adequate services for PWCD in Fiji.

Foreign Aid and Economic Growth in Developing Countries: An Instrumental Variables Approach

There is little consensus on the capacity for foreign aid to cause economic growth in developing countries. This is due in large part to the fact that foreign aid recipients are selected by donors, confounding identification. This paper proposes an identification strategy that exploits exogenous variation in foreign aid receipts generated by participation in Human Rights Treaties at the UN to identify an average causal effect of aid on growth. Our approach allows for heterogeneous effects of aid on growth across recipients for unobservable reasons, and we thus identify a Local Average Treatment Effect (LATE). Further, we normalize aid with respect to population as opposed to the more commonly used GDP for the purposes of identification and show that this choice has important implications for the identification and interpretation of the effect of aid. Our estimates imply that a percentage point increase in aid as a fraction of GDP causes the annual average growth rate in a recipient country to increase by about 0.6 percentage points. Though LATE's are instrument specific and thus subject to concerns about external validity, we provide evidence suggesting that our estimate is indeed externally valid. The estimated effect is explained almost entirely by an expansion of the service industry, accompanied by a large increase in household consumption, with no evidence that aid causes Dutch disease. We conclude that aid increases growth by inducing a structural change in household demand for services.

Foreign Aid Responses to Political Liberalization

This paper analyzes the impact of political liberalization on receipt of foreign aid. It distinguishes different types of donors facing different constraints in rewarding democratization with foreign aid, notably bilateral donors, the World Bank, and the European Commission. Based on a sample of 174 recipient countries from 1995 to 2009, the paper jointly examines short-term dynamics and long-term effects of sustained liberalization. Except for the World Bank, donors react to regime change. Bilateral donors are found to reward political liberalization in the second year after transition.

The impact of foreign aid on national income in Ghana: a test for long-run equilibrium

This study sets out to investigate the relationship between foreign aid and national income in Ghana, between 1980 and 2005 using fully modified ordinary least squares (FM-OLS). This is to ascertain whether foreign aid receipts have had significant impact on the level of Ghana’s gross national income. The autoregressive distributed lags (ARDL) bounds test and the Johansen cointegrating equations are used to test for the long-run equilibrium. Three different sample periods namely the pre-structural break, post-structural break, and full-period were used in the analysis. The results in the pre-structural break showed a positive and significant relationship between foreign aid and national income with lower aid elasticity. The post-structural break estimate showed a positive but insignificant relationship. On the contrary, the full sample showed a negative and insignificant relationship with lower income elasticity. The study recommends that, long-run aid that seeks to impact on national income or growth should be accompanied by a well-developed strategic plan to forecast, receive and manage a country’s foreign aid.

Human Rights Treaty Ratification of Aid Receiving Countries

This paper studies the decision to ratify Human Rights Treaties (hrt) at the United Nations. We present new empirical evidence that sheds light on who raties when and why. Controlling for the quality of domestic human rights institutions, high levels of predetermined hrt participation relative to other aid recipients has a signicant positive eect on a country’s foreign aid receipts, suggesting that aid donors use treaty participation as a criterion to allocate foreign aid. Surprisingly though, we nd that high levels of hrt participation precipitates a decline in the quality of domestic human rights institutions. Taken together with the result that donors reward treaty participation with foreign aid, this suggests that using foreign aid as an incentive for treaty participation has indirect negative consequences for real human rights, inconsistent with the traditional view that aid donors have a positive preference for human rights practices in developing countries. We show however that the treaty participation of other aid recipients has a strong and positive eect on domestic human rights institutions that more than osets the negative eects

Foreign Aid Dynamics in Democratic Transitions

This study analyzes the dynamic impact of democratization on receipt of foreign aid. Since the 1990s, this relationship has been increasingly important, given the end of the Cold War and the related turn to good governance, increased pressure from donor publics for political conditionality, and the evolving belief in a synergetic relationship between economic development and political reform among scholars and policy-makers. In this context, bilateral donors are expected to reward democratic recipients and particularly countries undergoing democratization with higher aid. Is this empirically the case? Specifically, are there any significant patterns in the temporal changes of foreign aid flows or across different types of aid? To address these questions, this study conceives democratization as a two-phase process of 'early transition' and 'democratic consolidation' and deduces that most aid decreases in the short run while increasing thereafter. It empirically assesses this hypothesis through two methodological approaches. First, using panel estimations for 143 aid recipients from OECD donors from 1995 to 2009, the study lends support to the anticipated pattern of short-run declines and more substantial subsequent increases in response to democratization for most types of aid. In particular, economic aid drops by 30 percent for the average recipient at the peak of transition, while robustly increasing by up to 50 percent thereafter. Democratization makes budget support more likely in the immediate term. This suggests that donors indeed reward democratization, while strategically choosing among the various instruments of aid. Second, flexible regressions for the 24 democratization episodes contained in the sample highlight the dynamic patterns of aid response, essentially confirming the anticipated patterns. Yet, the dynamic analysis reveals that the positive aid shock fades out rather quickly, thereby possibly endangering the hard-won polity progress in recipient countries.

Counting Chickens when they Hatch: Timing and the Effects of Aid on Growth

Recent research yields widely divergent estimates of the cross-country relationship between foreign aid receipts and economic growth. We re-analyse data from the three most influential published aid‐growth studies, strictly conserving their regression specifications, with sensible assumptions about the timing of aid effects and without questionable instruments. All three research designs show that increases in aid have been followed on average by increases in investment and growth. The most plausible explanation is that aid causes some degree of growth in recipient countries, although the magnitude of this relationship is modest, varies greatly across recipients and diminishes at high levels of aid. Economists have spent decades debating, without resolution, the cross-country relationship between foreign aid receipts and economic growth. Some find that aid robustly causes positive economic growth on average. Others cannot distinguish the average effect from zero. Still others find an effect only in certain countries, such as those with good policies or governance. Wearied readers of this literature would be right to wonder what produces diverse findings from apparently the same aid and growth data. Here, we show that two traits of previous research help to explain why different studies reach different conclusions. Both traits relate to how these studies treat the timing of causal relationships between aid and growth. First, the most cited research has focused on measuring the effect of aggregate aid on contemporaneous growth, while many aid-funded projects can take a long time to influence growth. Funding for a new road might affect economic activity in short order, funding for a vaccination campaign might only affect growth decades later and humanitarian assistance may never affect growth. Second, because current growth is likely to affect current aid, these studies require a strategy to disentangle correlation from causation. They have tended to rely on instrumental variables but the instruments that have been used are of questionable validity and strength. When these issues are addressed, the divergence in empirical findings is greatly reduced. We show this by stepwise altering the research design of the three most influential papers in the aid and growth literature. We hold all else constant: we begin by

Aid and Fertility

This paper uses a panel data from developing countries to study the relationship between foreign aid flows and fertility rates. By making use of natural disasters in neighboring countries as an instrumental variable to foreign aid receipts,I find that a percentage point increase in the share of aid in the GDP increases on average fertility rates among the population by 0.045 additional children. This can be translated to an additional child for about every 22 women of childbearing age. The positive effect of foreign aid on fertility rates can contribute to the current debate on foreign aid, and supply an additional explanation for its limited efficacy historically. By making use of the same instrumental variable, I also find no effect of foreign aid on other determinants of economic growth and growth itself.

U.S. asylum policy and the New World Order.

US policy on refugees was developed as an ad hoc response to the problem of displaced persons in Europe following the Second World War and quickly became a foreign policy tactic to be manipulated in the context of the Cold War political struggle. It was not until 1980 that the US formally adopted an asylee policy in legislative forum. That policy too was affected by the Cold War. The dismantlement of the Berlin Wall in 1989 and the subsequent collapse of the Soviet Union in 1991 however have radically changed the dynamics of refugee and asylee issues. Refugee and asylee pressures are increasingly being linked with the broader worldwide issues of population growth unbalanced economic development and migration pressures. New refugee and asylum policies are required in the new world order which are not predicated upon the need to respond to communism. These policies must be reserved for truly persecuted individuals. The author discusses the creation of an asylum policy mass asylum and pending policy reforms. The refugee system provides a means of access for many people looking to escape the poverty unemployment and destitution of their homeland. Asylum policy is the most vulnerable element of refugee policy for exploitation. To alleviate the economic forces which lie at the core of asylum abuse will require more fundamental policies than the procedural changes currently under consideration by Congress or those proposed by President Clinton. Among them must be policies which promote family planning and provide the means for its practice; expand commitments to economic development assistance; and link trade access to the US marketplace and the receipt of foreign aid to the strict adherence of internationally specified human rights practices.

AID, Policy and Peace: Reducing the risks of civil conflict

We analyze theoretically and empirically the effects of economic policy and the receipt of foreign aid on the risk of civil war. We find that aid and policy do not have direct effects upon conflict risk. However, both directly affect the growth rate and the extent of dependence upon primary commodity exports, and these in turn affect the risk of conflict. Simulating the effect of a package of policy reform and increased aid on the average aid recipient country, we find that after five years the risk of conflict is reduced by nearly 30%.

The Social Opportunity Cost of Foreign Exchange: A Partial Defence of Harberger et al.*

This paper clarifies the literature on shadow pricing foreign exchange by distinguishing between two different concepts of ‘the social opportunity cost’ of foreign exchange: (a) the increase in utility (divided by the marginal utility of income) due to the availability of an extra dollar of foreign aid receipts; and (b) the maximum amount of some numeraire good which can be used up by the public sector to produce an extra dollar of foreign exchange, without reducing welfare. Both these concepts can be measured by appropriate, but different, versions of the traditional ‘Harberger’ formula The difference disappears entirely under the assumptions which justify partial equilibrium analysis. All these points can be clarified using a single diagram

Force Ratios, Arms Imports and Foreign Aid Receipts in the Developing Nations

A simultaneous model for the force ratio, arms imports, and foreign aid receipts is estimated for a sample of seventy-six developing nations and the period 1978-84. Regression diagnostics are applied to identify outlier nations and to assess the sensitivity of the estimated coefficients to multicollinearity and influential observations. The influence diagnostics reveal that the inferences drawn from the empirical analysis are conditional on the composition of nations in the sample. In particular, the statistically significant, direct relationship between real per capita arms imports and foreign aid receipts found for the full sample of seventy-six countries largely reflects the influence of the half-dozen Middle Eastern nations in the sample. The key determinants of the force ratio (armed forces per thousand population) are per capita income and security concerns. Moreover, there are significant differences in the response of the force ratio to income across several of the major regions of the developing world. The force ratio, in turn, is the primary determinant of the level of arms imports. There is evidence of a strong import substitution effect for those developing nations exporting arms. And, whether the US or the USSR is the principal supplier of arms appears to make a difference for the volume of arms transfers. Foreign aid receipts do correspond to need, as measured by an international human suffering index. Nevertheless, outside of the Middle East, where aid flows are correlated with arms imports, a considerable portion of the aid is unexplained by the regression model.

Foreign Aid and Optimal Fiscal Policy

Foreign Aid and Optimal Fiscal Policy

Growth and Defense in Developing Countries

However, in a large study of less developed countries, an opposite pattern seemed to appear, and this finding was so unexpected and challenging that it seemed worth exploring in detail. In the course of that exploration, a number of interesting insights were achieved as to the nature of economic development and its relation to defense activity. The study covered the growth rates, investment rates, foreign aid receipts, and certain other variables of 44 LDCs between 1950 and 1965. These materials were analyzed primarily by means of correlation analysis. The 44-country sample covered about three-quarters of the population, GNP, and defense expenditures of the developing world, other than mainland China. The sample analysis was supplemented by case studies of India, South Korea, Mexico, Israel, the United Arab Republic, and Argentina. (See table 1.)

Financial Policy in Postwar Thailand: External Equilibrium and Domestic Development

Thailand, perhaps more than any other country, has been able to achieve rapid and substantial growth without inflation since World War II. Blessed with huge rice crops in a world hungry for rice, Thailand's astute money managers were able to restore order quickly-and with less inflation, as measured by wholesale prices, than the United States had for the two decades following the war. Of course, the strong preferences of the Thai people for their own consumer products, and later on the receipt of foreign aid, were also helpful in maintaining convertibility and a stable price level. Taking as a frame of reference the relationship between equilibrium in the balance of payments and domestic economic growth, this article will examine the role of financial policy in Thailand since World War II. Certain of the financial problems which Thailand has faced during the last twenty years are those which perplex many other underdeveloped countries today. They may be considered in terms of three highly interrelated areas: government expenditures and revenues, the monetary system, and the balance of payments. One such problem is that of obtaining the revenues with which to finance the governmental expenditures determined by the political leadership. The major sources are taxes, public bonds, foreign, loans and grants, and domestic credit creation-the naive version of which is printing paper currency, the sophisticated variant being government borrowing directly or indirectly from the central bank. It is hard to make extensive use of the credit-creation mechanism without generating domestic inflation. The establishment of an effective monetary system has both narrow and broad dimensions. In the narrow sense there are two problems: (1) developing a unified, efficient, and elastic money supply; and (2) controlling the money supply as an instrument of monetary policy. Both are prime functions of the central bank. Many underdeveloped countries today have solved at least the first problem reasonably well. For Thailand in the postwar years, however, a major objective of economic policy was to put the currency system in order once more. The broad dimension of an effective monetary system is the development