Foreign aid and fiscal behavior in a bounded rationality model: Different policy regimes

Ira N. Gang, Haider Ali Khan

Research output: Contribution to journalArticlepeer-review

15 Scopus citations

Abstract

We examine how the source of foreign aid affects the composition of the recipient government's spending. Does the source of aid - bilateral or multilateral - influence recipient policy-makers' choice between development and nondevelopment expenditure? We depart from previous literature by introducing strong asymmetries in policy-makers' preferences. With the financial constraints set by foreign aid and domestic revenues, this formalization allows us to model and estimate the fiscal behavior of government policy-makers in the presence of foreign aid.

Original languageEnglish (US)
Pages (from-to)121-134
Number of pages14
JournalEmpirical Economics
Volume24
Issue number1
DOIs
StatePublished - May 25 1999

All Science Journal Classification (ASJC) codes

  • Statistics and Probability
  • Mathematics (miscellaneous)
  • Social Sciences (miscellaneous)
  • Economics and Econometrics

Keywords

  • Foreign aid
  • India

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