How can the impact of aid be estimated in the presence of fungibility? And how far does fungibility reduce its benefits? These questions are analyzed in a context where a donor wants to target its efforts on a specific sector and specific geographic areas. A traditional...

The authors 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...

Scholars, policymakers, aid donors, and aid recipients acknowledge the importance of good governance for development. This understanding has spurred an intense interest in more refined, nuanced, and policy-relevant indicators of governance. In this paper we review progress to date in the area of...

The goal of this paper is to understand better, at the empirical level, how public spending contributes to growth by focusing on both the level and composition of public spending, in connection to the dynamics of GDP per capita growth. It attempts to answer two specific questions: (a) What are...

Evidence of public expenditure on infrastructure is extremely sparse. Little is known about the trends and patterns of infrastructure expenditure, and there is no real basis for assessing the adequacy and efficiency of infrastructure spending. Drawing on the World Bank's novel BOOST database,...

This paper responds to the development policy debate involving the World Bank and the IMF on the use of fiscal policy not only for economic stabilization but also to promote economic growth and increase per capita income. A key issue in this debate relates to the effect of the composition of...

This paper presents a small-scale intertemporal model of endogenous growth that accounts for the composition of public expenditure and externalities associated with public capital. Government spending is disaggregated into various components, including maintenance, security, and investment in...

Government spending in developing countries typically account for between 15 and 30 percent of GDP. Hence, small changes in the efficiency of public spending could have a major impact on GDP and on the attainment of the government's objectives. The first challenge that stakeholders face is...

This paper uses a novel loan-level dataset covering lending by official creditors to developing country governments to construct an instrument for public spending that can be used to estimate government spending multipliers. Loans from official creditors (primarily multilateral development banks...

Recent estimates of the welfare cost of consumption volatility find that it is significant in developing nations, where it may reach an equivalent of reducing consumption by 10 percent per year. Hence, examining the determinants of consumption volatility is of utmost relevance. Based on...