When Teachers Matter More: Governance Quality, Educational Returns, and Progress Toward <scp>SDG</scp> 4 in Developing Countries

ABSTRACT Achieving Sustainable Development Goal 4 (SDG 4) depends on both schooling access and the institutional context of educational investments. Despite substantial increases in teacher recruitment across developing countries, progress in educational attainment and learning outcomes remains uneven. This study examines whether and under what conditions teacher capacity contributes to progress toward SDG 4, with particular emphasis on the moderating role of governance quality. Using an unbalanced panel of 85 developing countries over the period 2000–2022, the analysis combines SDG‐aligned indicators of teacher capacity and educational outcomes with internationally comparable measures of governance quality. The study employs a dynamic system generalized method of moments estimator to capture short‐run dynamics, complemented by dynamic common correlated effects mean group estimation to identify long‐run relationships. The results indicate that higher teacher capacity significantly improves lower secondary completion rates, with a one‐unit reduction in the pupil–trained teacher ratio increasing completion by approximately 0.22 percentage points in the short run and 0.28–0.31 percentage points in the long‐run. Marginal effects analysis shows that these gains are amplified by 30%–40% in countries with higher government effectiveness, while effects are attenuated under weak governance. These findings indicate that governance acts as an institutional multiplier of educational returns. Robustness checks confirm stability across alternative specifications. The study therefore recommends integrated reform strategies combining teacher investments with strengthened accountability systems, teacher monitoring, and efficient resource allocation to maximize progress toward SDG 4.