Estimating the association between foreign aid for education and education outcomes

Abstract

Most aid effectiveness studies have revolved around the relationship between aid and growth. Considering the returns of education to economic growth and quality of life, this research adopts a sector-specific approach to investigate the association between aid for education and educational attainment. The association between aid for education and education outcomes is studied empirically for 169 aid-recipient countries from 1970 to 2013. The findings suggest that higher per capita education aid has a statistically significant association with the increased enrollment rates and completion rate. In contrast, aid for all sectors and a sector other than education as a placebo does not show such association. An additional $1,000 of per capita education aid is significantly associated with a 1% increase in enrollment rates and a 2% increase in the number of students reaching the final grade and the number of primary education graduates. The results are robust to different estimation methods, fixed-effects, and the set of control variables included in the regression estimations.