This paper explores the extent to which differences in the resources allocated to education explain differences in educational access and performance across countries. The cross-country regression analysis presented in the paper shows that the link between education outcomes and public education expenditure is weak.
The results are shown to be robust to different specifications of the regression model, different estimation techniques and controls for influential observations. Issues of data quality and reliability may be driving the results in part, but the results are consistent with previous cross-country and individual country studies.
The paper suggests that levels of household spending, the effectiveness of the public expenditure management system and the composition of public education spending are important factors explaining the weak link between spending and educational outcomes. The results of the paper imply that the achievement of the education millennium development goals will require more than just increases in expenditure on primary education.
This does not imply that resources are unnecessary, but that increasing resources alone is unlikely to be sufficient. The composition of resources and institutions that govern the use of these resources play a central role in translating resources into better schooling outcomes. A stronger focus on these aspects of education systems will be required if the Millennium Development Goals in education are to be achieved.