Details

Autor(en) / Beteiligte

• Bjørnskov, Christian
• Schröder, Philipp J.H.

Titel

Are debt repayment incentives undermined by foreign aid?

Ist Teil von

• Journal of Comparative Economics, 2013-11, Vol.41 (4), p.1073-1091

Ort / Verlag

San Diego: Elsevier Inc

Erscheinungsjahr

2013

Link zum Volltext

Quelle

Elsevier ScienceDirect Journals Complete

Beschreibungen/Notizen

• •Investigates the correlation between aid-inflow and sluggish debt-service.•Theoretical waiting-game used to provide a political economy perspective.•Uses large scale panel-data to examine effect of aid-inflow on debt repayment.•Finds that foreign aid inflow has negative influence on repayment incentives.•Resolves the underlying causality issue. This paper investigates the effects of inflows of foreign aid on the debt repayment behavior of developing countries. The paper first delineates the overall incentives to committing to timely debt repayment in a war of attrition-type model. A set of panel estimates including 93 developing countries shows that foreign aid is strongly negatively associated with repayment incentives. The findings pertain to both total debt service and service on publically guaranteed debt. A set of conditional estimates suggest that the main findings generalize to the majority of developing countries.