Is favoritism a threat to Chinese aid effectiveness? A subnational analysis of Chinese development projects
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 at times a jurisdiction is favored politically. 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 between 2001 and 2012—demonstrate that Chinese aid improves local development outcomes, regardless of whether such aid is given to jurisdictions at times they are the birth region of the country’s leader.
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SEPS - Economic Policy