July 22, 2020
Axel Dreher (Heidelberg)
“The Political Economy of Chinese Aid“
(with Andreas Fuchs (Goettingen), Bradley Parks (William and Mary), Austin Strange (Harvard) and Michael J. Tierney (William and Mary))
View a recording of the webinar here
Abstract
We investigate the political economy of Chinese foreign aid allocation and effectiveness. To this end, we introduce a new (geocoded) dataset of official financing from China to 138 countries over the 2000-2014 period. We use these data to investigate whether China’s foreign aid is prone to capture by political leaders of aid-receiving countries’ examining whether more Chinese aid is allocated to the birth regions of political leaders and regions populated by the ethnic groups to which leaders belong. Our results show that when leaders hold power their birth regions receive substantially more funding from China than other subnational regions. We use the new data to investigate whether and to what extent Chinese aid affects economic growth, health outcomes, and spatial concentration of economic activity in recipient countries, at the national and sub-national level. Our results show that Chinese aid improves some development outcomes but not others. What is more, the financing provided to regions while they were the birth regions of their countries’ leaders is as effective as funds given to the same regions at other times.