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Aid Disaggregation, Endogenous Aid and the Public Sector in Aid-Recipient Economies: Evidence from C.te d'Ivoire

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  • Political Science

Abstract

WIDER Discussion Paper 2003 015 Copyright � Author(s) 2003 1 UNU/WIDER, Katajanokanlaituri 6B, 00160 Helsinki, Finland, e-mail: [email protected]; 2 School of Economic Studies, University of Manchester, Manchester M13 9PL, UK, e-mail: [email protected] This study has been prepared within the UNU/WIDER project on New Directions in Development which is directed by Tony Addison. Discussion Paper No. 2003/15 Aid Disaggregation, Endogenous Aid and the Public Sector in Aid-Recipient Economies: Evidence from Côte d’Ivoire George Mavrotas1 and Bazoumana Ouattara2 February 2003 Abstract The present paper examines the impact of different aid types, namely project aid, programme aid, technical assistance and food aid on the fiscal sector of the aid-recipient economy by using time-series data for Côte d’Ivoire over the period 1975–99. Empirical results obtained by estimating correctly the solution of the theoretical model show that when a single value (or aggregated) for aid is used, foreign aid is fully consumed in the case of Côte d’Ivoire. However, results obtained under the assumption of aid heterogeneity clearly suggest that the government responds differently according to the nature of the aid inflows. Our approach sheds plenty of light on how the aid-recipient government reacts to different categories of foreign aid inflows and the empirical findings clearly demonstrate the importance of the aid disaggregation approach for delving deeper into aid effectiveness issues. Keywords: foreign aid, aid effectiveness, aid disaggregation, fiscal response literature, Côte d’Ivoire JEL classification: F35 The World Institute for Development Economics Research (WIDER) was established by the United Nations University (UNU) as its first research and training centre and started work in Helsinki, Finland in 1985. The Institute undertakes applied research and policy analysis on structural changes affecting the developing and transitional economies, provides a forum for th

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