Free DP Download 11 July 2019 - EFFECTIVENESS OF CHINESE AID: New evidence from development projects in Africa

Thursday, July 11, 2019


Is Favoritism a Threat to Chinese Aid Effectiveness? A Subnational Analysis of Chinese Development Projects
Axel Dreher, Andreas Fuchs, Roland Hodler, Brad Parks, Paul Raschky and Michael Tierney 
CEPR DP No. 13840 11 July 2019

The foreign aid provided by China comes with few strings attached, allowing leaders of recipient countries to use it for domestic political purposes. But according to a new CEPR study, despite Chinese favouritism towards the birth regions of national leaders, the effectiveness of the aid is not reduced. Contrary to conventional wisdom, local receipt of Chinese aid does not undermine economic development outcomes at either the district or provincial level. 

The vulnerability of Chinese aid to political capture has prompted speculation that it may be economically ineffective, or even harmful. The new research tests these claims by estimating the effect of Chinese aid on sub-national economic development – as measured by per capita night-time light emissions – and whether this effect is different in politically favoured jurisdictions than in other parts of the country.

The results – from 709 provinces and 5,835 districts within 47 African countries over the period from 2001 to 2012 – demonstrate that Chinese aid improves local development outcomes, regardless of whether such aid is allocated to politically consequential jurisdictions.  

Figure 1: Value of Chinese aid projects per capita in subnational ADM2 units in Africa (total value in 2009 US$, 2000-12)

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