Effects of foreign aid on the recipient country's economic growth (Q2304205)

The article offers a serious scientific analysis on the current topic of our time -- the impact of foreign aid on the economic growth of the recipient country. More specifically, the authors' investigations are aimed at analyzing the following important issues: 1. How does the recipient country use foreign aid to enhance economic growth? 2. What are the determinants of the effectiveness of foreign aid? 3. Why are the effects of foreign aid significant for some countries but not for others? The paper is organized as follows. Section 2 characterizes the case of a small recipient country. Section 3 presents the dynamics of capital, in particular, the poverty trap without international aid. In Section 4, the authors emphasize the role of foreign aid by analyzing the conditions for the effectiveness of aid. Section 5 studies effects of aid in a centralized economy. On the base of considered definitions in Section 2. -- intertemporal equilibrium, growth, collapse and poverty trap, the authors analyze the global dynamics of capital stock \(k_t\) and the effect of international aid on the recipients economic growth (Section 3). The transitional dynamics of capital without foreign aid is also discussed. Section 4 investigates effects of aid on the recipient prospects when the recipient country has high-quality circumstances in terms of efficiency in the use of aid, fixed cost and efficiency in public investment, autonomous technology, etc. The technical proofs of the basic mathematical results are presented in the Appendix.