A Cross-Country Panel Study

Client: Research on Estimating the Impact of Foreign Aid on Education in Developing Countries
Faculty: Jan Blustein and Beth Weitzman
Team: Jaume Blasco, Carlos Calderon, Ricardo Fernandez, ElleryGillette, Craig Mills
Year: 2005
Over the past few years, various studies have alternately demonstrated and refuted the ability of foreign aid to stimulate economic growth in developing countries, following the conventional wisdom that identifies growth as the major factor of poverty reduction. Nonetheless, these studies have not explored the effect of foreign aid on social outcomes such as health, education and gender parity. In this project, we used cross-country panel data covering 55 developing countries over 6 five-year periods between 1970 and1999 to estimate the impact of foreign aid on gross primary school enrollment and gender parity in education. Controlling for economic factors, demographic characteristics, institutional quality, and cultural attitudes towards women, the preliminary results of both a pooled cross-sectional and a panel OLS regression suggest a small but statistically significant effect of aid on the educational outcomes of interest.