The World Bank Economic Review Advance Access originally published online on April 11, 2008
The World Bank Economic Review 2008 22(2):291-314; doi:10.1093/wber/lhn003
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Does Aid for Education Educate Children? Evidence from Panel Data
Axel Dreher (corresponding author) is a senior researcher at the KOF Swiss Economic Institute, ETH Zurich, and a research affiliate at the Institute for Economic Research, Center for Economic Studies (CESifo), at the University of Munich
Peter Nunnenkamp is Head of the Research Area Global Division of Labour at the Kiel Institute for the World Economy; his email address is peter.nunnenkamp{at}ifw-kiel.de
Rainer Thiele is Head of the Research Area Poverty Reduction, Equity, and Development at the Kiel Institute for the World Economy; his email address is rainer.thiele{at}ifw-kiel.de
Correspondence: his email address is mail{at}axel-dreher.de
JEL codes: F35, O11, H52, I22
Most of the aid effectiveness literature has focused on the potential growth effects of aggregate aid, with inconclusive results. Considering that donors have repeatedly stressed the multidimensionality of their objectives, a more disaggregated view on aid effectiveness is warranted. The impact of aid on education is analyzed empirically for almost 100 countries over 1970–2004. The effectiveness of sector-specific aid is assessed within the framework of social production functions. The Millennium Development Goals related to education, particularly the goal of achieving universal primary school enrollment, are considered as outcome variables. The analysis suggests that higher per capita aid for education significantly increases primary school enrollment, while increased domestic government spending on education does not. This result is robust to the method of estimation, the use of instruments to control for the endogeneity of aid, and the set of control variables included in the estimations.