Interactions with Education Aid

Descriptive analysis of the data held for the 61 countries shows that those classed as low-income generally perform worse in terms of educational outcomes and the quality of their political and economic governance. They are also the countries most susceptible to conflict^. The relative amount of education aid allocated to low-income countries in particular has been significantly less than that allocated to lower-middle-income countries over the over forty year period. Moreover, aid dependency (as measured by the amount of aid allocated as a percentage of recipient country GDP), is far higher than it is elsewhere in the world - in Zambia and Mozambique, both low-income and highly aid dependent countries, 62 and 51 per cent respectively of total public education expenditure is found to be aid funded⁷. These findings point to the need to understand how education aid performs in these distinct country settings - with the presence of conflict and the quality of political and economic governance considered as factors that have the potential to influence the effectiveness of aid for education.

The bivariate analysis that follows considers how these diverse development environments influence the impact of aid on education outcomes. By including interactions it ought to be possible to examine how country heterogeneity influences the impact of education aid on primary enrolment. As education aid expressed in constant per capita US$ is the most intuitive expression of the aid variable, the interactions of those variables whose effect might reasonably be expected to work through aid (the degree of democratic freedom, economic openness, government stability and the presence of conflict) are discussed

below. This informs the selection of interaction variables for inclusion in the final multivariate modelling of the education aid-enrolment relationship.

When examining the effect of interactions between aid and variables related to the quality of country governance - government stability; openness to trade; and democratic freedom - on enrolment, the results are found to be mixed (Table 6).

The interaction between government stability and education aid is included in the bivariate analysis as the extent to which the quality of policy and institutions affect the impact of aid is a topic in the development literature that has been heatedly debated (Collier and Dollar 2002; Benyon 2003; McGillivray, Feeny et al. 2005; Nyamongo and Schoeman 2010). There is reason to believe that government stability might affect the degree of impact that

education aid may have. (Krauss 2013) finds evidence of political stability being strongly correlated with increased government spending and improved school enrolment in Ghana, arguing a stable and willing government as having been a fundamental condition for tax collection – a prerequisite for public resource spending and a central policy tool for the stimulation of growth and investment in education. In a study on the quality of governance and education spending in Africa, Nyamongo and Schoeman (2010) find ‘better’ levels of good governance to be associated with higher expenditures on education whereas more corrupt governments will spend proportionately larger amounts on the purchase of military equipment and opportunities for forceful political dominance. As increasingly greater proportions of aid are allocated in the form of budget support, identifying how education aid works in differing contexts of government stability provides insight into the importance of this issue at the education sector level.

Government stability as applied here is a measure both of a government’s ability to carry out its declared programmes, and its ability to stay in office; it depends on the type of governance, the cohesion of the government and governing party or parties, the closeness of the next election, the government’s command of the legislature, and popular approval of government policies (The PRS Group 2015). The average of the 61 countries’ stability indices were between 5 and 6 in the periods 1980-94 with a marked increase in the

subsequent period to 9 following the demise of the Soviet Union and end of the Cold War.

As government stability increased with the inception of multi-party politics and the

consequent reduction in coup d’états, the data show an apparent rise also in the level of aid commitments made to education. Aid during the Cold War period had largely been

directed to allies in support of proxy wars (Novelli 2010); following the end of the Cold

War, the declared focus of official aid began to move further towards the alleviation of poverty and the promotion of development. The rise in educational commitments may be reflective of a shift in aid resources toward social sectors during this time of relative peace and is clearly tied with a renewed focus on education following the announcement of the MDGs (Novelli and Robertson 2007). The interaction between aid and government stability is shown to be positively, although weakly, significant [0.074 (0.081)] in its correlation with the net primary enrolment rate, suggesting that aid is likely to be more effective when allocated in countries demonstrating better measures of government stability.

Gwartney, Hall et al. (2015) argue that greater degrees of economic freedom, or particular aspects of economic freedom, bring about an independent and significant positive impact on per capita income, investment, and economic growth. Whether greater economic freedom influences the effectiveness of education aid in particular, is an issue for research in the education literature given the importance placed on education as a predictor of economic growth. The effects of a country’s openness to trade, defined here as economic openness, measured by the degree to which the policies and institutions of countries are supportive of economic freedom - the cornerstones of which are considered to be:

personal choice, voluntary exchange, freedom to compete, and security of privately owned property (Gwartney, Hall et al. 2015) - show there to have been a very gradual

improvement in economic freedom across the group, with countries ranging in place on the index from around 5 in 1970-74 to 6 in 2010-13. Openness to trade is found to have no significance in its working through education aid to impact upon enrolment at primary school level [0.143 (0.273)].

Svensson (1999) and Michaelowa and Weber (2007b) contend that greater freedom in democratic institutions allows for better checks on governments, resulting in the more productive use of aid. It follows that education aid should, therefore, be more effective in countries where there is a greater degree of democratic freedom. Political rights and civil liberties are taken to be an indication of the level of democracy in a given country, covering the broader political and institutional environment (Freedom House 2015). The number of low- and lower-middle-income countries attaining full democratic freedom has increased substantially over time, from just 5 countries in 1970-74 to 15 in 2010-13. Overwhelmingly, the majority of countries indicated not to be free are in the low-income group.

Lower-effect of partial democratic freedom (for a full definition refer to Appendix 1) working through aid that is found to be statistically significant as a predictor of primary enrolment, with the direction of the effect being negative [0.693 (0.077)].

Table 6: Interaction Between Quality of Governance and Per Capita Education Aid Commitments

Interaction 61 Developing Countries

Education Aid -0.282 (0.353)

Education Aid * Government Stability *0.074 (0.081)

Education Aid -0.063 (0.833)

Education Aid * Democratically Partly Free (Ref: Not Free) *0.693 (0.077)

Education Aid * Democratically Free (Ref: Not Free) 0.374 (0.224)

Education Aid -0.490 (0.465)

Education Aid * Economic Openness 0.143 (0.273)

Sources: Freedom House (2015); Gwartney, Hall et al. (2015); OECD CRS (2015); The PRS Group (2015) P-value in parentheses * significant at 10% ** significant at 5% *** significant at 1%

There is reason to believe that aid delivered in post-conflict environments may behave differently than in other ‘fragile states’ where studies have pointed to it being relatively ineffective due to weak capacity and institutions (Burnside and Dollar 2000; Collier and Dollar 2002; Colenso 2011). The cessation of conflict creates an immediate rebound of economic activity as donor and government consumption of local goods and services stimulates broader economic activity, with Collier and Hoeffler (2004) arguing that the economic circumstance of post-conflict societies being therefore quite distinct from other developing countries in the early post-conflict years. They propose that opportunities for recovery enable a phase when economic growth is ‘supra-normal’, with the need to restore infrastructure juxtaposed against the collapse of revenue, making aid unusually productive.

This finding is tested to see whether it holds true for education aid, given the importance that educationalists place on education in reconstruction efforts (see, for example,

Buckland 2005; Aguilar and Retamal 2009; Winthrop, Ndaruhutse et al. 2010), to ascertain whether this is an area in which education aid might be more effectively targeted.

Interactions of education aid with conflict (in a particular period, or at any point in time) are also included to help create a better understanding of the effects of educational assistance during times of conflict. Accounting for the effect of current or recent emergence from conflict, various measures of conflict are included as interactions with education aid to help understand how aid works in these difficult development

environments. Conflict is defined here as the use of armed force between two parties - at least one of which is the government of a state - and which results in at least 25

battle-related deaths (Themner and Wallensteen 2012). In each of the five-year time periods, between a quarter and a third of the 61 low- and lower-middle-income countries

experienced conflict (UCDP/PRIO 2015). That the prevalence of conflict is found to be so high supports the rationale for exploring the impact of education aid in post-conflict settings, in which education objectives are deemed to be of utmost importance to reconstruction efforts.

Interactions between different measures of conflict - whether conflict was experienced in the given period; whether conflict had taken place in a given country at any point in the period 1970-2013⁸; or whether a country was in a period of post-conflict - and aid are modeled to show the effect of their interaction on primary enrolment. Both the interaction of education aid with conflict in a particular period and conflict at any point in time are found to be significant, whilst the interaction demonstrating the effect of education aid working during periods of post-conflict recovery is shown to be insignificant (Table 7).

Table 7: Interaction Between Conflict Status and Per Capita Education Aid Commitments

Interaction 61 Developing Countries

Education Aid **0.351 (0.031)

Education Aid * Conflict (Ref: No Conflict) *-0.621 (0.052)

Education Aid 0.556 (0.157)

Education Aid * Conflict at any point during the period

1970-2010 (Ref: No Conflict at any point) **-2.966 (0.045)

Education Aid *0.376 (0.035)

Education Aid * Post-Conflict (Ref: No Post-Conflict) -0.429 (0.315)

Sources: OECD CRS (2015) and UCDP/PRIO (2015)

P-value in parentheses * significant at 10% ** significant at 5% *** significant at 1%

As the second research question is concerned with how recipient heterogeneity in terms of the quality of governance and the presence of conflict affect aid’s impact upon enrolment, a broadening of the usual levels of significance to include those interactions significant at 10 per cent was allowed. The selection of interactions considered in the multivariate modelling of the aid-enrolment relationship is summarised in Table 8.

Table 8: Significant Interactions for Inclusion in Multivariate Analysis Interaction with education aid

commitments Education Aid

(per capita constant US$) Conclusion

Government Stability Significant (8%) Include

Democratic Freedom Significant (8%) Include

Conflict Significant Include

Post-Conflict Not significant

Conflict at any Time Significant Include

Economic Openness Not Significant

Sources: The PRS Group (2015); Freedom House (2015); UCDP/PRIO (2015); and Gwartney, Hall et al. (2015) NB: ‘Significant’ indicates a p-value <0.05 (5%) unless otherwise stated