Corruption and the composition of government expenditure

https://mpra.ub.uni-muenchen.de/62288/1/MPRA_paper_62288.pdf

Aid and growth regressions

In the efficient allocation of aid, aid is targeted disproportionately to countries with severe poverty and adequate policies. For a given level of poverty, aid tapers in with policy reform. In the actual allocation of aid, aid tapers out with reform. Aid now lifts about 30 million people a year out of absolute poverty. With a poverty-efficient allocation, the same amount of aid would lift about 80 million people out of poverty. Collier and Dollar derive a poverty-efficient allocation of aid and compare it with actual aid allocations. They build the poverty-efficient allocation in two stages. First they use new World Bank ratings of 20 different aspects of national policy to establish the current relationship between aid, policies, and growth. Onto that, they add a mapping from growth to poverty reduction, which reflects the level and distribution of income. They compare the effects of using headcount and poverty-gap measures of poverty. They find the actual allocation of aid to be radically different from the poverty-efficient allocation. In the efficient allocation, for a given level of poverty, aid tapers in with policy reform. In the actual allocation, aid tapers out with reform. In the efficient allocation, aid is targeted disproportionately to countries with severe poverty and adequate policies - the type of country where 74 percent of the world's poor live. In the actual allocation, such countries receive a much smaller share of aid (56 percent) than their share of the world's poor. With the present allocation, aid is effective in sustainably lifting about 30 million people a year out of absolute poverty. With a poverty-efficient allocation, this would increase to about 80 million people. Even with political constraints introduced to keep allocations for India and China constant, poverty reduction would increase to about 60 million. Reallocating aid is politically difficult, but it may be considerably less difficult than quadrupling aid budgets, which is what the authors estimate would be necessary to achieve the same impact on poverty reduction with existing aid allocations. This paper - a joint product of the Office of the Director, and Macroeconomics and Growth, Development Research Group - is part of a larger effort in the group to examine aid effectiveness.

Aid Allocation and Poverty Reduction

Using two unifying models and an empirical exercise, this paper present and extends the main theories linking income distribution and growth, as well as the relevant empirical evidence. The first model integrates the political economy and imperfect capital markets theories. It allows for explicit departures from perfect democracy and embodies the tradeoff between the growth costs and benefits of redistribution through taxes, land reform or public schooling: such policies simultaneously depress savings incentives and ease wealth constraints which impede investment by the poor. The second model is a growth version of the prisoner's dilemma which captures the essence of theories where sociopolitical conflict reduces the security of property rights thereby discouraging accumulation. The economy's growth rate is shown to fall with interest groups' rent-seeking abilities, as well as with the gap between rich and poor. It is not income inequality per se that matters, but inequality in the relative distribution of earnings and political power. For each of the three channels of political economy, capital markets and social conflict, the empirical evidence is surveyed and discussed in conjunction with theoretical analysis. Finally, the possibility of multiple steady-states leads me to to raise and take up a new empirical issue: are cross-country differences in inequality permanent, or gradually narrowing? Equivalently, is there conver- gence not only in first moments (GDP per capita), but convergence in distribution?

https://papers.ssrn.com/sol3/Delivery.cfm/nber_w5658.pdf?abstractid=3357&mirid=1&type=2

Inequality and Growth

https://www.mathematik.uni-ulm.de/wipo/lehre/ws200708/public_economics/Kneller_Bleaney_Gemmell

Fiscal policy and growth: evidence from OECD countries

http://down.aefweb.net/WorkingPapers/w77.pdf

The composition of public expenditure and economic growth

Rajkumar and Swaroop examine the role of governance - measured by level of corruption and quality of bureaucracy - and ask how it affects the relationship between public spending and outcomes. Their main innovation is to see if differences in efficacy of public spending can be explained by quality of governance. The authors find that public health spending lowers child and infant mortality rates in countries with good governance. The results also indicate that as countries improve their governance, public spending on primary education becomes effective in increasing primary education attainment. These findings have important implications for enhancing the development effectiveness of public spending. The lessons are particularly relevant for developing countries, where public spending on education and health is relatively low, and the state of governance is often poor. This paper - a product of Public Services, Development Research Group - is part of a larger effort in the group to better understand issues relating to effective service delivery.

https://papers.ssrn.com/sol3/Delivery.cfm/15176.pdf?abstractid=636188&mirid=1

Public Spending and Outcomes: Does Governance Matter?

The donor community has been increasingly concerned that development assistance intended for crucial social and economic sectors might be used directly or indirectly to fund unproductive military and other expenditures. The link between foreign aid and public spending is not straightforward because some aid may be fungible. This article empirically examines the impact of foreign aid on the recipient's public expenditures, using cross-country samples of annual observations for 1971-90. For the base sample of 14 developing countries, it finds that aid is not fungible at the aggregate level and there is no associated tax relief. Increasing the number of countries, however, makes aid fungible. Moreover, results based on the main sample indicate that aid is fungible in three out of five sectors examined. Developing country governments receiving earmarked concessionary loans for agriculture, education, and energy reduce their own resources going to these sectors and use them elsewhere; only loans to the transport and communication sector are fully spent on the purposes intended by donors. Because most aid appears to be fungible, the rate of return on a specific donor-funded project tells little about the impact of that assistance; a better approach may be to tie foreign aid to an overall public expenditure program that provides adequate resources to crucial sectors.

/pdf/a-panel-data-analysis-of-the-fungibility-of-foreign-aid-264ka6bdwk.pdf

A Panel Data Analysis of the Fungibility of Foreign Aid

http://directory.umm.ac.id/Data%20Elmu/jurnal/J-g/Journal%20Of%20Public%20Economics/Vol77.Issue3.Sep2000/1944.pdf

Vinaya Swaroop

Papers

The composition of public expenditure and economic growth

Public Spending and Outcomes: Does Governance Matter?

A Panel Data Analysis of the Fungibility of Foreign Aid

Public Spending and Outcomes: Does Governance Matter?

Fiscal effects of foreign aid in a federal system of governance: The case of India