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Discussion Paper Details

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Title: Connective Financing - Chinese Infrastructure Projects and the Diffusion of Economic Activity in Developing Countries

Author(s): Richard Bluhm, Axel Dreher, Andreas Fuchs, Brad Parks, Austin Strange and Michael J. Tierney

Publication Date: May 2020

Keyword(s): China, Development finance, foreign aid, infrastructure, spatial concentration and transport costs

Programme Area(s): Development Economics, International Trade and Regional Economics, Macroeconomics and Growth and Public Economics

Abstract: This paper studies the causal effect of transport infrastructure on the spatial concentration of economic activity. Leveraging a new global dataset of geo-located Chinese government-financed projects over the period from 2000 to 2014 together with measures of spatial inequality based on remotely-sensed data, we analyze the effects of transport projects on the spatial distribution of economic activity within and between regions in a large number of developing countries. We find that Chinese-financed transportation projects reduce spatial concentration within but not between regions. In line with land use theory, we document a range of results which are consistent with a relocation of activity from city centers to their immediate periphery. Transport projects decentralize activity particularly strongly in regions that are more urbanized, located closer to the coast, and less developed.

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Bibliographic Reference

Bluhm, R, Dreher, A, Fuchs, A, Parks, B, Strange, A and Tierney, M. 2020. 'Connective Financing - Chinese Infrastructure Projects and the Diffusion of Economic Activity in Developing Countries'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=14818