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Will Foreign Aid Foster Economic Development? Grid Panel Data Evidence from China’s Aid to Africa

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  • Zhicheng Xu
  • Yu Zhang
  • Yang Sun

Abstract

The fast growth and unique model of Chinese aid provide new perspectives and empirical evidence for the study of aid effectiveness. This paper employs GIS technology to match Chinese aid projects in Africa with satellite-measured nighttime lights – a proxy of economic development and converts them into 0.5° (longitude) x 0.5° (latitude) panel data. First, we find that Chinese aid projects are positively correlated to Africa’s economic development. Second, we gain a deep understanding of the mechanisms and find that the aid-growth relationship is mostly attributed to economic infrastructure aid rather than social welfare projects, direct aid as well as production and other types of projects. Spatial panel regression further validates the robustness of the empirical results and sheds light on the spillover effects of Chinese aid. Moreover, our results also suggest that Chinese aid brings some side effects on the recipient countries, as it may intensify the spatial economic inequalities.

Suggested Citation

  • Zhicheng Xu & Yu Zhang & Yang Sun, 2020. "Will Foreign Aid Foster Economic Development? Grid Panel Data Evidence from China’s Aid to Africa," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 56(14), pages 3383-3404, November.
    • Handle: RePEc:mes:emfitr:v:56:y:2020:i:14:p:3383-3404
    DOI: 10.1080/1540496X.2019.1696187
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    Cited by:

    1. Abreham Adera, 2024. "Chinese Aid Projects and Local Tax Attitudes: Evidence from Africa," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 36(1), pages 102-134, February.
    2. Mandon, Pierre & Woldemichael, Martha Tesfaye, 2023. "Has Chinese aid benefited recipient countries? Evidence from a meta-regression analysis," World Development, Elsevier, vol. 166(C).
    3. Lee, Chien-Chiang & Zhao, Ya-Nan, 2023. "Heterogeneity analysis of factors influencing CO2 emissions: The role of human capital, urbanization, and FDI," Renewable and Sustainable Energy Reviews, Elsevier, vol. 185(C).

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