Aid and government: a dynamic model of aid, income and fiscal behaviour

Howard White

Research output: Working paperAcademic

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A recent advance in the analysis of the impact of aid inflows on domestic savings has been models that focus specifically on the response of public savings to higher aid. The theoretical consensus of this new literature is that aid displaces taxes and that the increment to government expenditure is less than the value of the aid inflow. This paper presents a simple model that replicates this result and then shows that the result need no longer hold once we allow for feedback effects through higher income. Whether or not aid adversely affects taxes is shown to depend, inter alia, on the impact of aid on private investment.
Original languageEnglish
Place of PublicationDen Haag
PublisherInternational Institute of Social Studies (ISS)
Number of pages34
Publication statusPublished - Jun 1992
Externally publishedYes

Publication series

SeriesISS working papers. General series


  • ISS Working Paper-General Series


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