Aid volatility, human capital, and growth

Pierre Richard Agénor, Nihal Bayraktar

Research output: Contribution to journalArticlepeer-review

Abstract

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.

Original languageEnglish (US)
Pages (from-to)401-448
Number of pages48
JournalJournal of Human Capital
Volume14
Issue number3
DOIs
StatePublished - Sep 1 2020

All Science Journal Classification (ASJC) codes

  • Economics, Econometrics and Finance(all)

Fingerprint Dive into the research topics of 'Aid volatility, human capital, and growth'. Together they form a unique fingerprint.

Cite this