Education Sector Foreign Aid and Economic Growth in Africa

Abstract

This paper explores whether education sector foreign aid influences economic growth in Africa based on a panel of 32 countries over the period 2005 – 2017. The major novelty of the study is that on the supply side the major dependent variable, education aid flows, are disaggregated by education level. On the demand side, the recipient economies are accorded their income groups to account for capacities that complement the effects of human capital development on economic growth as well as the benevolent complementary or destabilizing effects of different political systems of government. The key findings are that: (i) education aid in aggregate form and primary education aid both enhance economic growth in low income countries; (ii) in middle income countries higher education aid is more important for economic growth than primary and secondary education foreign aid; (iii) democracies have a stronger tendency to allocate more education sector foreign aid to primary education, while in autocracies the orientation is towards higher education. The findings imply that low-income autocracies that allocate more education sector foreign aid to higher education than to primary education do so at the expense of economic growth. The same applies to middle-income democracies whose allocation orientation is more towards primary education compared to higher education.