Handbook on the Economics of Foreign Aid
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Handbook on the Economics of Foreign Aid

Edited by B. Mak Arvin and Byron Lew

It would be fair to say that foreign aid today is one of the most important factors in international relations and in the national economy of many countries – as well as one of the most researched fields in economics. Although much has been written on the subject of foreign aid, this book contributes by taking stock of knowledge in the field, with chapters summarizing long-standing debates as well as the latest advances. Several contributions provide new analytical insights or empirical evidence on different aspects of aid. As a whole, the book demonstrate how researchers have dealt with increasingly complex issues over time – both theoretical and empirical – on the allocation, impact, and efficacy of aid, with aid policies placed at the center of the discussion.
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Chapter 24: The effects of education aid on primary schooling in developing countries

Eskander Alvi and Debasri Mukherjee


In this chapter we investigate if foreign aid that is targeted at education has desired schooling effects. It is well known that education can make a significant difference to growth outcomes and economic well-being of a country. Primary education, in particular, enables a productive labor force and also helps lessen the incidence of child labor, reducing which is in its own right a desirable social objective. Since the mid-1940s equality of educational opportunities for all has been perceived as a major principle and was highlighted in the constitution of the United Nations. However it was not until 2000 that a framework for universal education was put in place (at the Forum of Dakar) with commitments to strengthen financing by international donors and assurances that resources would be available to meet the objectives of universal primary education and gender parity by 2015, objectives that were soon strengthened by the Millennium Development Goals (MDGs). The literature on effectiveness of aid, however, has mostly dealt with the macroeconomic side, looking for aid to enhance gross domestic product (GDP) per capita. To date, such aggregate or growth effects of foreign aid remain highly contested, arguments ranging widely both in favor and against efficacy of aid. While the results there are mixed, targeted aid in some capacities, on balance, has had a relatively better performance record.

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