Foreign aid and child educational attainment in developing countries

The nature of the relationship between the provision of foreign aid to developing countries and the subsequent social and economic benefits experienced by them has long been debated. A small group of studies focus on the connection between aid and child school enrolment. However, these studies examine only the degree of correlation between the two variables, shedding little or no light on the direction of causation. Using the method of Granger causality, this paper extends our knowledge of the aid-education relationship by investigating whether foreign aid flows influence children's subsequent enrolment in school, whether prevailing school enrolments influence subsequent aid receipts, or whether causality proceeds in both directions simultaneously. Using data on OECD donors' provision of aid to developing countries, our results suggest that the aid-education relationship varies considerably across sub-samples defined according to recipient countries' geographic region.