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The World Bank Economic Review Advance Access published online on April 11, 2008
The World Bank Economic Review, doi:10.1093/wber/lhn003
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© The Author 2008. Published by Oxford University Press on behalf of the International Bank for Reconstruction and Development / THE WORLD BANK. All rights reserved. For permissions, please e-mail: journals.permissions@oxfordjournals.org

Does Aid for Education Educate Children? Evidence from Panel Data

Axel Dreher, Peter Nunnenkamp, and Rainer Thiele

Correspondence: 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.

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; his 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. The authors thank Christian Conrad, Martin Gassebner, Katja Michaelowa, participants at a seminar at the Kiel Institute for the World Economy, and three anonymous referees for their useful comments and suggestions, and Michaela Rank for excellent research assistance. A supplemental appendix to this article is available at www://wber.oxfordjournals.org


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