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Dodging Adverse Selection: How Donor Type and Governance Condition Aid’s Effects on School Enrollment

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  • Christensen, Zachary
  • Homer, Dustin
  • Nielson, Daniel L.
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    Abstract

    We employ AidData to test the effects of primary-education aid on school enrollment. We argue that the problem of adverse selection complicates both the allocation and the effectiveness of aid. We hypothesize that bilateral donors ought to have greater freedom to condition aid on recipient governance quality than multilateral donors, which are often bound by institutional rules to provide aid more impartially. Compared to their multilateral counterparts, bilateral donors may have advantages in overcoming adverse selection, resulting in bilateral aid’s boosting enrollments to a greater degree. AidData’s extensive coverage of multilateral aid enables this analysis for up to 100 low- and low-middle-income countries from 1995 to 2008. Latent growth regression analysis suggests that, compared to multilateral donors, bilateral donors indeed condition their primary education aid on recipient control of corruption and that bilateral aid is significantly related to improved enrollments.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0305750X11001938
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    Article provided by Elsevier in its journal World Development.

    Volume (Year): 39 (2011)
    Issue (Month): 11 ()
    Pages: 2044-2053

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    Handle: RePEc:eee:wdevel:v:39:y:2011:i:11:p:2044-2053
    Contact details of provider: Web page: http://www.elsevier.com/locate/worlddev

    Keywords: less-developed countries; foreign aid; adverse selection; enrollment rates; education; latent growth;

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    Cited by:

    1. Axel Dreher & Vera Eichenauer & Kai Gehring, 2013. "Geopolitics, Aid and Growth," CESifo Working Paper Series 4299, CESifo Group Munich.
    2. Lee, Suejin A. & Lim, Jae-Young, 2014. "Does International Health Aid Follow Recipients’ Needs? Extensive and Intensive Margins of Health Aid Allocation," World Development, Elsevier, vol. 64(C), pages 104-120.
    3. Birchler, Kassandra & Michaelowa, Katharina, 2016. "Making aid work for education in developing countries: An analysis of aid effectiveness for primary education coverage and quality," International Journal of Educational Development, Elsevier, vol. 48(C), pages 37-52.
    4. Douzounet MALLAYE & Urbain Thierry YOGO, 2015. "How Aid Helps Achieving MDGs in Africa: the Case of Primary Education," Working Papers 201501, CERDI.

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