Does Health-related Aid Really Matter? Evidence from South Asia

Using data from South Asia for the period 1990–2017, this paper examines the effectiveness of the health sector aid on infant mortality, neonatal mortality, child mortality and a new composite index of child mortality. The investigation of South Asia is interesting not only because it accounts for roughly one quarter of the world population and has attracted significant aid over the years but also because of the significant variations in health outcomes between countries in the region. Applying the instrumental variables method to account for the endogeneity of aid, we find that health-focused aid assists in improving child health outcomes in South Asian countries. The effect operates mainly through female literacy and is robust to a variety of specifications. Our findings have significant policy implications for achieving the post-MDG target and point to the importance of the health sector aid to improve child health for countries swamped with poorer health status.