Does Foreign Aid Improve Human Capital? Fertility Rates as a Moderator

Abstract

This paper aims to analyze the effect of foreign aid on human capital and examines whether the fertility rate moderates this relationship. Using dynamic panel data from 119 aid recipient countries from 2002 to 2022, the results indicate that foreign aid is positively associated with human capital development measured by Human Development Index (HDI). The findings also show that fertility rates negatively moderate the impact of foreign aid on human capital. This suggests that foreign aid is less effective in improving human capital in countries with high fertility rates, highlighting the importance of incorporating measures that account for fertility rates in aid policies.