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Does Aid for Education Educate Children? Evidence from Panel Data

This paper empirically analyzes the impact of aid on education for about 100 countries over the period 1970-2005. We estimate a system of equations to test whether and to what extent the impact of sector-specific aid on educational attainment depends on (i) the extent to which aid adds to overall educational expenditure of the recipient government, (ii) the strength of the link between government expenditure and education, (iii) the quality of institutions in the recipient country, and (iv) whether aid encourages institutional reforms. According to our results, aid significantly increases primary school enrolment. This result is robust to the method of estimation, employing instruments to control for the endogeneity of aid, and the measure of institutional quality employed. The degree of institutional quality, however, has no robust impact on this relationship.

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Paper provided by KOF Swiss Economic Institute, ETH Zurich in its series KOF Working papers with number 06-146.

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Length: 42 pages
Date of creation: Aug 2006
Date of revision:
Handle: RePEc:kof:wpskof:06-146
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  1. Axel Dreher & Peter Nunnenkamp & Rainer Thiele, 2006. "Does US Aid Buy UN General Assembly Votes? A Disaggregated Analysis," KOF Working papers 06-138, KOF Swiss Economic Institute, ETH Zurich.
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  5. Deon Filmer & Lant Pritchett, 1999. "The Effect of Household Wealth on Educational Attainment: Evidence from 35 Countries," Population and Development Review, The Population Council, Inc., vol. 25(1), pages 85-120.
  6. Marijn Verhoeven & Sanjeev Gupta & Erwin Tiongson, 1999. "Does Higher Government Spending Buy Better Results in Education and Health Care?," IMF Working Papers 99/21, International Monetary Fund.
  7. J. Svensson, 1999. "Aid, Growth and Democracy," Economics and Politics, Wiley Blackwell, vol. 11(3), pages 275-297, November.
  8. Barro, Robert J., 1999. "Determinants of Democracy," Scholarly Articles 3451297, Harvard University Department of Economics.
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  12. Reinikka, Ritva & Svensson, Jakob, 2002. "Explaining Leakage of Public Funds," CEPR Discussion Papers 3227, C.E.P.R. Discussion Papers.
  13. Barro, Robert J & Lee, Jong-Wha, 2001. "International Data on Educational Attainment: Updates and Implications," Oxford Economic Papers, Oxford University Press, vol. 53(3), pages 541-63, July.
  14. Pritchett, Lant, 1996. "Where has all the education gone?," Policy Research Working Paper Series 1581, The World Bank.
  15. Thiele, Rainer & Nunnenkamp, Peter & Dreher, Axel, 2006. "Sectoral aid priorities: Are donors really doing their best to achieve the millennium development goals?," Proceedings of the German Development Economics Conference, Berlin 2006 21, Verein für Socialpolitik, Research Committee Development Economics.
  16. McGillivray, Mark, 2003. "Aid Effectiveness and Selectivity: Integrating Multiple Objectives into Aid Allocations," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  17. Philipp Harms & Matthias Lutz, 2004. "The Macroeconomic Effects of Foreign Aid: A Survey," University of St. Gallen Department of Economics working paper series 2004 2004-11, Department of Economics, University of St. Gallen.
  18. Richard Blundell & Steve Bond, 1995. "Initial conditions and moment restrictions in dynamic panel data models," IFS Working Papers W95/17, Institute for Fiscal Studies.
  19. Raghuram G. Rajan & Arvind Subramanian, 2008. "Aid and Growth: What Does the Cross-Country Evidence Really Show?," The Review of Economics and Statistics, MIT Press, vol. 90(4), pages 643-665, November.
  20. Matthew Odedokun, 2004. "Multilateral and Bilateral Loans versus Grants: Issues and Evidence," The World Economy, Wiley Blackwell, vol. 27(2), pages 239-263, 02.
  21. Burnside, Craig & Dollar, David, 1997. "Aid, policies, and growth," Policy Research Working Paper Series 1777, The World Bank.
  22. Michael A. Clemens & Steven Radelet & Rikhil Bhavnani, 2004. "Counting chickens when they hatch: The short-term effect of aid on growth," International Finance 0407010, EconWPA.
  23. Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, vol. 68(1), pages 29-51, July.
  24. Jan Pettersson, 2007. "Foreign sectoral aid fungibility, growth and poverty reduction," Journal of International Development, John Wiley & Sons, Ltd., vol. 19(8), pages 1074-1098.
  25. Paul Mosley & John Hudson & Arjan Verschoor, 2004. "Aid, Poverty Reduction and the 'New Conditionality'," Economic Journal, Royal Economic Society, vol. 114(496), pages F217-F243, 06.
  26. McGillivray, Mark & Feeny, Simon & Hermes, Niels & Lensink, Robert, 2005. "It Works; It Doesn't; It Can, But That Depends?: 50 Years of Controversy over the Macroeconomic Impact of Development Aid," Working Paper Series RP2005/54, World Institute for Development Economic Research (UNU-WIDER).
  27. Behrman, Jere R & Sengupta, Piyali & Todd, Petra, 2005. "Progressing through PROGRESA: An Impact Assessment of a School Subsidy Experiment in Rural Mexico," Economic Development and Cultural Change, University of Chicago Press, vol. 54(1), pages 237-75, October.
  28. Wolf, Susanna, 2007. "Does Aid Improve Public Service Delivery?," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  29. Tito Cordella & Giovanni Dell'Ariccia, 2003. "Budget Support Versus Project Aid," IMF Working Papers 03/88, International Monetary Fund.
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  33. repec:bla:restud:v:58:y:1991:i:2:p:277-97 is not listed on IDEAS
  34. Susanna Wolf, 2007. "Does Aid Improve Public Service Delivery?," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 143(4), pages 650-672, December.
  35. Hulya Ulku & Tito Cordella, 2004. "Grants Versus Loans," IMF Working Papers 04/161, International Monetary Fund.
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  38. Horst Feldmann, 2010. "Government size and unemployment in developing countries," Applied Economics Letters, Taylor & Francis Journals, vol. 17(3), pages 289-292, February.
  39. George Mavrotas, 2005. "Aid heterogeneity: looking at aid effectiveness from a different angle," Journal of International Development, John Wiley & Sons, Ltd., vol. 17(8), pages 1019-1036.
  40. David Roodman, 2003. "XTABOND2: Stata module to extend xtabond dynamic panel data estimator," Statistical Software Components S435901, Boston College Department of Economics, revised 01 Oct 2015.
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