Growth in the Shaded Sun: The Role of International Development Finance and Corruption

Chansik Yoon

Adelaide Economics Working Papers from Adelaide University, School of Economics

Abstract: I study how developing-country governments decide the amount, sources, and sectoral allocation of development finance (DF) as China has emerged alongside traditional donors. Using project-level data from nearly 110 countries (2000–2021), I document systematic patterns in DF allocation across countries, sectors, and providers that vary with corruption and monitoring intensity. I develop a growth model in which governments allocate DF while choosing how much investment to divert under provider-specific monitoring and financing conditions. Calibrating the model to 108 countries shows heterogeneous welfare implications of Chinese DF: about 15% of countries gain while roughly 55% experience welfare losses.

Keywords: Foreign aid; Growth; Development; Chinese lending; Corruption; Institutions; Public investment; Development assistance (search for similar items in EconPapers)
Date: 2026-03
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Persistent link: https://EconPapers.repec.org/RePEc:adl:wpaper:2026-03

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