Ira Gang
Rutgers University
Department of Economics
E-mail: gang@economics.rutgers.edu
Item Number: [J28]
Title: Reply to White 'Foreign Aid, Taxes and Public Investment:
A Further Comment'
Abstract: Our paper presented and estimated a rather straightforward
model of policy-maker behavior in examining how developing countries allocate
the foreign aid they receive. In part, our contribution was methodological,
refocussing the issue of aid impacts on intermediate short-run variables
and shifting the study of aid impacts from cross-country to the analysis
of behavior in a single country. The paper has many obvious shortcomings:
the over-restrictive formulation of the policy-maker preference function
and the constraints placed on their behavior, the difficulty in empirically
measuring the theoretical variables including the formulation of the targets
by policy-makers, the assumed exogeneity of aid, and interpreting time series
estimates in light of the short-run nature of the theoretical model.
Our compromises, we felt, were reasonable and we explicitly laid out all
the steps we did in hopes that others, if they found this approach interesting,
would improve on our methodology. The comment by White illustrates
some of these short-comings but does little to improve on our analysis.
Here we highlight some of the major issues he raises.
Reference: Ira N. Gang and Haider Ali Khan, Reply to White
'Foreign Aid, Taxes and Public Investment: A Further Comment', Journal
of Development Economics, 45 (1994) 165-167.
Co-Author Information:
Haider Ali Khan
Graduate School of International Studies, University of Denver
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