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What Does Aid to Africa Finance?

Authors:Shantayanan Devarajan , Andrew Sunil Rajkumar  and Vinaya Swaroop
Web Address:Public Services
Report Number:WPS2092
Citation: 

"What Does Aid to Africa Finance?" World Bank Policy Research Working Paper Number 2092, V. Swaroop, S. Devarajan, and A. Rajkumar, October 1998.

If a donor gives aid for a project that the recipient government would have undertaken anyway, then the aid is financing some expenditure other than the intended project. The notion that aid in this sense may be "fungible," while long recognized, has recently been receiving some empirical support. This paper focuses on Sub-Saharan Africa—the region with the largest GDP share of aid—and presents results that indicate that aid may be partially fungible, and suggests some reasons why.

Data are in file called "afraid," which gives original data as well as final data used, which is almost all in first differences.

Variables:
agrgdp:agriculture as share of GDP
popn: population
infmort: infant mortality rate
schprim: primary school enrolment rate
schsec: secondary school enrolment rate
gdnpp: GDP per capita, in 1995 US$
grtdsbp: total grant disbursement, in 1995 US$ and per capita
grlndsbp: total concessional loan disbursement, in 1995 US$ and per capita
aiddsbp: total foreign aid disbursement, in 1995 US$ and per capita (=grtdsbp+grlndsbp)
totexpp: total government expenditure, in 1995 US$ and per capita
agexpp: government expenditure on agriculture, in 1995 US$ and per capita
entexpp: government expenditure on energy, in 1995 US$ and per capita
indexpp: government expenditure on industry, in 1995 US$ and per capita
tacexpp: government expenditure on transport & communications, in 1995 US$ and per capita
eduexpp: government expenditure on education, in 1995 US$ and per capita
hthexpp: government expenditure on health, in 1995 US$ and per capita
prirepp: principal repayments, in 1995 US$ and per capita
curexpp: current government expenditure, in 1995 US$ and per capita
capexpp: capital government expenditure, in 1995 US$ and per capita
cnlnagp: concessionary loans to agriculture sector, in 1995 US$ and per capita
cnlnenp: concessionary loans to energy sector, in 1995 US$ and per capita
cnlninp: concessionary loans to industry sector, in 1995 US$ and per capita
cnlntacp: concessionary loans to transport & communications sector, in 1995 US$ and per capita
cnlnedup: concessionary loans to education sector, in 1995 US$ and per capita
cnlnhthp: concessionary loans to health sector, in 1995 US$ and per capita
cnlnothp: concessionary loans to other sectors, in 1995 US$ and per capita
D0: number of donors

Variables in first differences:
First differences were taken of all aid and expenditure variables, as well as of GDP, before being used in regressions. These are also given in the file "afraid". They are denoted as follows:

dgrtdsbp = first difference of variable "grtdsbp"
dgrlndsbp = first difference of variable "grlndsbp"
daiddsbp = first difference of variable "aiddsbp"

etc. (i.e. a "d" is inserted in front of the variable name to denote the first difference.)

Publication date:  March 1, 1999

Access to Dataset
  • Dataset (MS Excel file, 389kb)





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