An Econometric Analysis of the Fiscal Behavior of the Public Sector in Developing Countries: Aid, Investment and Taxation

Abstract

This paper analyzes the issue of the role of the public sector in the planning and implementation of development projects in most less developed countries. To this purpose, the author has developed a cross-section time-series econometric model of the public sector of eleven African countries. The model will examine the interactions among several types of public expenditure and will distinguish between tax and nontax revenues and domestic borrowing. It will also facilitate a more precise understanding of how aid affects the public sector.