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Post-disaster aid and development of the manufacturing sector: Lessons from a natural experiment in China

Erwin Bulte (), Lihe Xu and Xiaobo Zhang ()

European Economic Review, 2018, vol. 101, issue C, 441-458

Abstract: We adopt a disaggregate approach to study the link between aid and Dutch Disease dynamics, using a natural experiment in China. Specifically, we examine whether post-disaster aid provided to a subsample of Chinese counties, devastated by an earthquake in 2008, affects the sectoral composition of local economies. Using different methods we consistently find that counties receiving (more) aid — even “nearby counties” not directly damaged by the earthquake — tend to suffer from a contraction of the manufacturing sector. Innovative features of the paper include its regional perspective; its identification strategy (resting on a special provision in Chinese policy—pairwise aid); and its focus on Dutch disease effects in the context of post-disaster aid.

Keywords: Aid; Growth; Dutch disease; China (search for similar items in EconPapers)
JEL-codes: F35 O14 (search for similar items in EconPapers)
Date: 2018
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DOI: 10.1016/j.euroecorev.2017.10.019

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