Does aid improve public service delivery?

The expected increase in aid to Africa will put a big challenge for public service delivery. Using a simultaneous equation model, this paper provides an analysis of the effects of the volume and volatility of aid on education, health, water and sanitation outcomes, taking also into account the institutions related to public service delivery, including freedom of press, corruption and decentralization. Overall, the share of official development assistance (ODA) that is provided for education and health seems to have a positive impact on the outcomes in these sectors, whereas total aid seems to be negatively associated. Aid volatility is associated with better outcomes in sanitation, water and infant mortality, contrary to expectations.