Investment in education is widely recognized as a key driver of economic growth, social mobility, and poverty reduction, especially in low and middle-income countries. However, despite large increases in government education spending, low secondary school completion rates remain inconsistent across LMICs. This study investigates whether higher education spending leads to higher completion rates or if structural, governance, and socioeconomic factors play a larger role. This study uses panel data from 78 LMICs (2007-2023) and applies Difference-in-Differences (DiD) and Fixed Effects (FE) models to provide empirical evidence on the effectiveness of education investment in improving completion rates. Findings challenge the assumption that increased government education spending directly improves completion rates. Across all statistical models, education expenditure as a percentage of GDP is not significantly associated with completion rates (p > 0.10 in all models). Instead, gross secondary enrollment (β = 0.66, p < 0.001 in DiD) is the strongest predictor of completion, emphasizing that expanding access is more impactful than increasing budgets alone. The results also show that governance stability plays an important role, with political stability (β = 2.01, p = 0.013 in FE post-SDG 4) positively affecting completion rates. However, corruption control remains statistically insignificant (p > 0.50 in all models), suggesting that systemic inefficiencies limit the impact of funding increases in many LMICs. The introduction of Sustainable Development Goal in 2015 had a little but statistically significant impact on completion rates, with the DiD model determining a +2.57-percentage point increase (p = 0.015) in post-2015 years. However, the Fixed Effects model suggests that these improvements weaken over time, indicating that policy inefficiencies, economic disparities, and infrastructure constraints continue to hinder sustained progress. Simply increasing education budgets does not automatically translate into better outcomes unless they are backed up by strategic reforms targeting institutional capacity, teacher training, and school infrastructure. Several structural challenges persist in achieving SDG 4 targets. Political instability disrupts education policies, leading to inconsistent reforms and reduced school attendance. Household financial constraints, including indirect schooling costs, remain a major barrier for many students, limiting retention despite policy efforts. Furthermore, infrastructure deficiencies—such as inadequate classrooms, unreliable electricity, and poor sanitation—continue to restrict student learning environments, contributing to high dropout rates despite rising enrollment numbers. These findings contribute to both theoretical and policy discussions; From a theoretical standpoint, the study is consistent with Human Capital Theory and the Education Production Function (EPF) model, confirming that financial resources must be strategically allocated to produce better student outcomes. For policymakers, prioritizing enrollment expansion, teacher quality improvements, infrastructure development, and stable governance is more effective than simply increasing budgets; Targeted policies—such as conditional cash transfers, school meal programs, vocational training, and digital learning initiatives—are necessary to ensure equitable access and sustained student retention. In conclusion, education investment alone is not enough to improve lower secondary school completion rates in LMICs; Without policy coherence, institutional stability, and well-targeted reforms, increased spending risks being misallocated and fails to produce the desired results. To achieve SDG 4’s goal, LMICs must adopt a comprehensive approach that integrates investment with systemic reforms, ensuring that educational expansion leads to meaningful student success.
| Date of Award | 2025 |
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| Original language | American English |
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| Awarding Institution | - HBKU College of Public Policy
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