TY - JOUR
T1 - Aid volatility, human capital, and growth
AU - Agénor, Pierre Richard
AU - Bayraktar, Nihal
N1 - Funding Information:
We are grateful to Devrim Yilmaz, participants at various seminars and conferences, and especially the editors and two anonymous referees for many helpful comments on a previous version. King Yoong Lim provided able research assistance. Financial support from the DFID-ESRC (Department for International Development–Economic and Social Research Council) Growth Research Programme, under grant ES/L012022/1, is gratefully acknowledged.
PY - 2020/9/1
Y1 - 2020/9/1
N2 - We study the effect of aid volatility on education outcomes and economic growth, in a model that focuses on a low-income economy where acquiring skills benefits from public subsidies partly financed through foreign aid. By creating uncertainty about the net return to education, a high degree of aid volatility mitigates agents’ incentives to invest in skills. If savings and growth depend on the composition of the labor force, aid volatility may have an adverse effect on themean growth rates of investment and output. Panel data regressions for a group of aid-dependent countries provide robust evidence of a negative relationship between the volatility of education aid and schooling outcomes.
AB - We study the effect of aid volatility on education outcomes and economic growth, in a model that focuses on a low-income economy where acquiring skills benefits from public subsidies partly financed through foreign aid. By creating uncertainty about the net return to education, a high degree of aid volatility mitigates agents’ incentives to invest in skills. If savings and growth depend on the composition of the labor force, aid volatility may have an adverse effect on themean growth rates of investment and output. Panel data regressions for a group of aid-dependent countries provide robust evidence of a negative relationship between the volatility of education aid and schooling outcomes.
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U2 - 10.1086/710321
DO - 10.1086/710321
M3 - Article
AN - SCOPUS:85091786886
SN - 1932-8575
VL - 14
SP - 401
EP - 448
JO - Journal of Human Capital
JF - Journal of Human Capital
IS - 3
ER -
