Is Favoritism a Threat to Chinese Aid Effectiveness? A Subnational Analysis of Chinese Development Projects
Axel Dreher (),
Andreas Fuchs (),
Paul Raschky () and
Michael J. Tierney
No 13840, CEPR Discussion Papers from C.E.P.R. Discussion Papers
Chinese aid comes with few strings attached, allowing recipient country leaders to use it for domestic political purposes. The vulnerability of Chinese aid to political capture has prompted speculation that it may be economically ineffective, or even harmful. We test these claims by estimating the effect of Chinese aid on subnational economic development - as measured by per-capita nighttime light emissions - and whether this effect is different in politically favored jurisdictions than in other parts of the country. Contrary to the conventional wisdom, we do not find that the local receipt of Chinese aid undermines economic development outcomes at either the district level or provincial level. Nor does political favoritism in the allocation of Chinese aid towards the home regions of recipient country leaders reduce its effectiveness. Our results - from 709 provinces and 5,835 districts within 47 African countries from 2001-2012 - demonstrate that Chinese aid improves local development outcomes, regardless of whether such aid is allocated to politically consequential jurisdictions.
Keywords: Africa; Aid effectiveness; China; Development finance; economic growth; favoritism; foreign aid (search for similar items in EconPapers)
JEL-codes: D73 F35 O19 O47 P33 R11 (search for similar items in EconPapers)
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Working Paper: Is favoritism a threat to Chinese aid effectiveness? A subnational analysis of Chinese development projects (2019)
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