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

Author

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  • Ngoc Sang Pham
  • Thi Kim Cuong Pham

    (EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique)

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.
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Suggested Citation

  • Ngoc Sang Pham & Thi Kim Cuong Pham, 2019. "Foreign aid, recipient government's fiscal behavior, and economic growth," Post-Print hal-03159220, HAL.
    • Handle: RePEc:hal:journl:hal-03159220
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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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    14. Azam, Jean-Paul & Laffont, Jean-Jacques, 2003. "Contracting for aid," Journal of Development Economics, Elsevier, vol. 70(1), pages 25-58, February.
    15. Ouattara, B., 2006. "Foreign aid and government fiscal behaviour in developing countries: Panel data evidence," Economic Modelling, Elsevier, vol. 23(3), pages 506-514, May.
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    17. Jean-Louis Combes & Rasmane Ouedraogo & Sampawende J.-A. Tapsoba, 2016. "Structural shifts in aid dependency and fiscal policy in developing countries," Applied Economics, Taylor & Francis Journals, vol. 48(46), pages 4426-4446, October.
    18. Tito Cordella & Giovanni Dell'Ariccia, 2007. "Budget Support Versus Project Aid: A Theoretical Appraisal," Economic Journal, Royal Economic Society, vol. 117(523), pages 1260-1279, October.
    19. Karen L. Remmer, 2004. "Does Foreign Aid Promote the Expansion of Government?," American Journal of Political Science, John Wiley & Sons, vol. 48(1), pages 77-92, January.
    20. Gomanee, Karuna & Morrissey, Oliver & Mosley, Paul & Verschoor, Arjan, 2005. "Aid, Government Expenditure, and Aggregate Welfare," World Development, Elsevier, vol. 33(3), pages 355-370, March.
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    Cited by:

    1. 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.
    2. 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.
    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

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    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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