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Foreign aid, recipient government’s fiscal behavior and economic growth

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  • Ngoc-Sang PHAM
  • Thi Kim Cuong PHAM

Abstract

The paper investigates the nexus between foreign aid, fiscal policy and economic outcomes in a small recipient country. Foreign aid may increase not only government expenditures but also private capital, and hence improve economic growth. However, it may also discourage the recipient’s tax effort. The effects of foreign aid on fiscal policy and economic growth depend on the circumstances of the recipient country, including its development level, the TFP, the efficiency of public investment, and in particular the government’s concern for the population’s welfare.

Suggested Citation

  • Ngoc-Sang PHAM & Thi Kim Cuong PHAM, 2019. "Foreign aid, recipient government’s fiscal behavior and economic growth," Working Papers of BETA 2019-22, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    • Handle: RePEc:ulp:sbbeta:2019-22
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    References listed on IDEAS

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    1. Pham, Ngoc-Sang & Pham, Thi Kim Cuong, 2020. "Effects of foreign aid on the recipient country’s economic growth," Journal of Mathematical Economics, Elsevier, vol. 86(C), pages 52-68.
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    Cited by:

    1. Le Van, Cuong & Pham, Ngoc-Sang & Pham, Thi Kim Cuong, 2023. "Effects of development aid (grants and loans) on the economic dynamics of the recipient country," Mathematical Social Sciences, Elsevier, vol. 125(C), pages 101-112.
    2. Fengsheng Chien & Ka Yin Chau & Talla M. Aldeehani & Pham Quang Huy & Luc Phan Tan & Muhammad Mohsin, 2022. "Does external debt as a new determinants of fiscal policy influence sustainable economic growth: implications after COVID-19," Economic Change and Restructuring, Springer, vol. 55(3), pages 1717-1737, August.
    3. Jordan Signor & Julien Vandernoot, 2021. "Does Foreign Aid Contribute to HDI Improvement?," Advances in Management and Applied Economics, SCIENPRESS Ltd, vol. 11(2), pages 1-2.

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    More about this item

    Keywords

    Foreign aid; fiscal behavior; public investment; public services; economic growth.;
    All these keywords.

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H5 - Public Economics - - National Government Expenditures and Related Policies
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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