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Title: Chinese Aid and Health at the Country and Local Level

Author(s): John Cruzatti C., Axel Dreher and Johannes Matzat

Publication Date: June 2020

Keyword(s): Fungibility, Health Aid and infant mortality

Programme Area(s): Development Economics and Public Economics

Abstract: We investigate whether and to what extent Chinese development finance affects infant mortality, combining 92 demographic and health surveys (DHS) for a maximum of 53 countries and almost 55,000 sub-national locations over the 2002-2014 period. We address causality by instrumenting aid with a set of interacted variables. Variation over time results from indicators that measure the availability of funding in a given year. Cross-sectional variation results from a sub-national region's "probability to receive aid." Controlled for this probability in tandem with fixed effects for country-years and provinces, the interactions of these variables form powerful and excludable instruments. Our results show that Chinese aid increases infant mortality at sub-national scales, but decreases mortality at the country-level. In several tests, we show that this stark contrast likely results from aid being fungible within recipient countries.

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Bibliographic Reference

Cruzatti C., J, Dreher, A and Matzat, J. 2020. 'Chinese Aid and Health at the Country and Local Level'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=14862