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Summary In this paper we explore the effects of fiscal policies and growth on measures of household welfare across the distribution of expenditures for two African countries: Rwanda and Tanzania. We explore the effect of government expenditures on expenditure growth in each quintile of the expenditure distribution and the effect of growth for each group. We find that the benefits of growth are concentrated among the better-off sectors of the population in these two countries (perhaps to the detriment of the poorer sectors) by looking at the effects within a country and across different groups of households and administrative entities. We exploit variation in expenditures and growth across and within regions of each country to estimate the elasticities of expenditure with respect to fiscal expenditure and mean expenditure growth at different points of the expenditure distribution, using household survey data and government expenditure data at the district level. We find that, overall, mean expenditure growth benefits the top expenditure groups. The welfare spillovers are mostly present for top 20% of the expenditure distribution, with the middle of the distribution in Tanzania responding slightly to these spillovers. Public/social expenditures do not appear to affect inequality considerably, but do tend to work toward decreasing inequality. However, mean expenditure growth is related to increases in inequality in the sense that the richest sectors of the population benefit the most from growth. We find that the growth elasticity of expenditure is only above one for the top quintile in both countries. In Tanzania, a 1% increase in average household expenditure is related to a 1.96% expenditure growth in the top quintile and 0.43% in the third quintile. In Rwanda, a 1% increase in average household expenditure is related to a 1.93% increase in household expenditure in the top 20% of the distribution.

Summary This paper tests the hypothesis that aid contributes to increasing aggregate welfare, measured by infant mortality and the Human Development Index (HDI), in recipient countries. Estimation is based on data for 104 countries over the period 1980–2000, and for subsamples of low-income and middle-income countries. Fixed effect estimates provide robust evidence that aid is associated with improved values of the welfare indicators, and this effect appears to be greater in low-income countries. Aid appears to increase welfare either directly or through the effect on growth, and there is no evidence that aid operates through public spending.

Summary This article investigates determinants of China’s mortality levels and trends since 1981. Econometric results show that both economic development and social policies matter to survival outcomes, but in different magnitudes for various mortality measures. Economic growth plays a key role in reducing mortality in childhood and especially adulthood, and raises life expectancy. Declining adult illiteracy is a critical factor in reducing child mortality and increasing life expectancy. Stock of health practitioners, share of government expenditure for health and education, and policy biases favoring cities and coastal areas selectively affect survival. Authors propose policies for further reducing mortality in China today.

Many countries have experienced difficulties managing commodity export booms. Botswana has been an exception. By adopting appropriate macroeconomic policies in response to variable diamond receipts. Botswana has avoided balance-of-payments crises and associated adjustment costs. The policies adopted have included avoiding excessive increases in government expenditure during boom periods, instead building up international reserves and government balances at the central bank to be used when the boom ended. In addition, through management of the nominal exchange rate, real exchange rate appreciation has been avoided. The benefits of the policies adopted, as well as their opportunity costs, are discussed.

This paper is an exercise in the incorporation of “political economy” constraints into the analysis of policy reform. It is an illustrative exercise, focusing on the potential distributional consequences of agricultural price reform. In the stylized model discussed in the paper, “urban bias” is reflected in the ability of the urban sector to maintain its standard of living in the face of price reform, through the channel of increased government expenditure on the output of the sector. It is shown that in such a setting price reform may have completely unintended effects. The paper appears in a somewhat unusual format. The first half of the paper presents the arguments in an entirely non-technical, verbal, manner. The second half of the paper presents a formal, mathematical development which makes precise the heuristic and intuitive discussions of the first half.

As a consequence of economic stagnation and the increasing difficulties faced by developing country governments in financing their budgets, it might be expected that the education sector in these countries would suffer cutbacks. On the other hand, in most countries the education sector has high political, social and economic priority and is therefore one of the more difficult sectors within which to make adjustments. This paper examines the experience of 18 Latin American countries in terms of how educational spending has evolved at each educational level during the period 1965–1978. A comparison is made of the periods before and after the adjustment of the 1970s. The authors evaluate the form that expenditure adjustments have taken and conclude with some remarks on the patterns which emerged.

This paper explores the evolution, current problems, and possible future developments of the tax system of Papua New Guinea, leaving aside the important question of natural resource taxation. The paper concludes that there is at present a serious mismatch between the nature of Papua New Guinea's economy and its taxes. In particular, taxation must be extended to reach the bulk of economic activity in the country. No matter what is done in this respect, however, Papua New Guinea is most unlikely to be able to finance its current level of government expenditure in the absence of additional aid or natural resource revenue. The major public sector problem confronting the country is therefore not tax reform, but expenditure reform.

There is not much support in less developed countries for the hypothesis that recurrent government expenditure is seen as consumption and hence more dispensable than capital expenditure. There is little evidence of a secular decline in recurrent expenditure for a group of 54 less developed countries over the period 1965–1973, nor is there strong evidence of greater instability in recurrent expenditure.