There has been considerable concern in the international development community about aid displacement in the health sector. That is, a concern that foreign aid to the health sector leads to a displacement or diversion of government funds from the health sector. Foreign aid, also known as development assistance, includes funding from international development agencies in donor countries, multila...

The main aim of this W orking Paper is to assess the impact of foreign aid inflows on public expenditure, revenue and domestic borrowing in Ethiopia. The paper provides a literature overview of the fiscal effects of aid, and then applies a fiscal response model to Ethiopian data for the period 1964-2005. Since the empirical literature finds little evidence of common crosscountry patterns, this ...

Where Has All the Money Gone? Foreign Aid and the Quest for Growth This paper examines fungibility as a possible explanation for the "missing link" between foreign aid and economic growth. The composition of aid plays a crucial role in determining the composition of government spending and, consequently, the magnitude of fungibility and its impact on growth. Embedding fungibility as an equilibr...

Where Has All the Money Gone? Foreign Aid and the Quest for Growth This paper examines fungibility as a possible explanation for the "missing link" between foreign aid and economic growth. The composition of aid plays a crucial role in determining the composition of government spending and, consequently, the magnitude of fungibility and its impact on growth. Embedding fungibility as an equilibr...

In his famous article on “The nature of the firm”, Ronald Coase (1937) sought to answer the question why firms exist, why there are many firms and not just one, why people do not work as individual producers but rather in firms. He suggested that transaction costs could explain the boundaries of the firm and that suggestion later on gave rise to an abundant literature on vertical integration. T...