IDEAS home Printed from https://ideas.repec.org/a/bla/chinae/v30y2022i2p1-27.html
   My bibliography  Save this article

Does Horizontal‐Paradigm Aid Weaken the Governance of Recipient Countries? Evidence from China

Author

Listed:
  • Luhao Liu
  • Xudong Hu
  • Zhongxiu Zhao

Abstract

China's aid has always been an interesting topic in the field of development economics, and the effectiveness of aid is also a controversial subject in the literature. This paper explores the relationship between China's aid and the governance of its recipient countries from 2000 to 2014. We found that, compared with the “vertical paradigm” of traditional donors, China's “horizontal paradigm” has unique features, promoting the governance of recipient countries. We employed a cross‐sectional estimation and panel analysis with several regression methods. While our cross‐sectional findings did not yield robust evidence to support a relationship between Chinese aid and its recipients' governance, our panel data regressions found a significant and positive relationship. The results were robust in a dynamic panel, even after correcting for endogeneity. Thus, China's aid has a positive influence on governance with the inclusion of time series. The relationship was found to vary according to aid types.

Suggested Citation

  • Luhao Liu & Xudong Hu & Zhongxiu Zhao, 2022. "Does Horizontal‐Paradigm Aid Weaken the Governance of Recipient Countries? Evidence from China," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 30(2), pages 1-27, March.
    • Handle: RePEc:bla:chinae:v:30:y:2022:i:2:p:1-27
    DOI: 10.1111/cwe.12408
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/cwe.12408
    Download Restriction: no
    File URL: https://libkey.io/10.1111/cwe.12408?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Angus Deaton, 2010. "Instruments, Randomization, and Learning about Development," Journal of Economic Literature, American Economic Association, vol. 48(2), pages 424-455, June.
    2. Daron Acemoglu & Simon Johnson & James A. Robinson, 2001. "The Colonial Origins of Comparative Development: An Empirical Investigation," American Economic Review, American Economic Association, vol. 91(5), pages 1369-1401, December.
    3. Busse, Matthias & Gröning, Steffen, 2009. "Does foreign aid improve governance?," Economics Letters, Elsevier, vol. 104(2), pages 76-78, August.
    4. Jiajun Xu & Richard Carey, 2014. "China's Development Finance: What Issues for Reporting and Monitoring Systems?," IDS Bulletin, Blackwell Publishing, vol. 45(4), pages 102-113, July.
    5. Simeon Djankov & Jose Montalvo & Marta Reynal-Querol, 2008. "The curse of aid," Journal of Economic Growth, Springer, vol. 13(3), pages 169-194, September.
    6. Tavares, Jose, 2003. "Does foreign aid corrupt?," Economics Letters, Elsevier, vol. 79(1), pages 99-106, April.
    7. Jones, Sam & Tarp, Finn, 2016. "Does foreign aid harm political institutions?," Journal of Development Economics, Elsevier, vol. 118(C), pages 266-281.
    8. Young, Andrew T. & Sheehan, Kathleen M., 2014. "Foreign aid, institutional quality, and growth," European Journal of Political Economy, Elsevier, vol. 36(C), pages 195-208.
    9. Hansen, Henrik & Tarp, Finn, 2001. "Aid and growth regressions," Journal of Development Economics, Elsevier, vol. 64(2), pages 547-570, April.
    10. Raghuram G. Rajan & Arvind Subramanian, 2008. "Aid and Growth: What Does the Cross-Country Evidence Really Show?," The Review of Economics and Statistics, MIT Press, vol. 90(4), pages 643-665, November.
    11. Justin Yifu Lin & Yan Wang, 2020. "Seventy Years of Economic Development: A Review from the Angle of New Structural Economics," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 28(4), pages 26-50, July.
    12. Simplice A. Asongu & Joseph Nnanna, 2019. "Foreign aid, instability and governance in Africa," Research Africa Network Working Papers 19/022, Research Africa Network (RAN).
    13. David Dollar & Craig Burnside, 2000. "Aid, Policies, and Growth," American Economic Review, American Economic Association, vol. 90(4), pages 847-868, September.
    14. Amitav Acharya & Antoni Estevadeordal & Louis W. Goodman, 2019. "Reshaping Global Order in the 21st Century: G‐Plus Leadership in a Multiplex World," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 27(5), pages 63-78, September.
    15. Yue Lu & Wei Gu & Ka Zeng, 2021. "Does the Belt and Road Initiative Promote Bilateral Political Relations?," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 29(5), pages 57-83, September.
    16. Agnafors, Marcus, 2013. "Quality of Government: Toward a More Complex Definition," American Political Science Review, Cambridge University Press, vol. 107(3), pages 433-445, August.
    17. Peter Kragelund, 2008. "The Return of Non-DAC Donors to Africa: New Prospects for African Development?," Development Policy Review, Overseas Development Institute, vol. 26(5), pages 555-584, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. agarwal, shekhar & Gordon, Anna, 2022. "Complexities for the Indian Economy of China's Growing Technological Competence," OSF Preprints fk3r7, Center for Open Science.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Dzhumashev, Ratbek & Hailemariam, Abebe, 2021. "Foreign aid and the quality of economic institutions," European Journal of Political Economy, Elsevier, vol. 68(C).
    2. Maruta, Admasu Asfaw & Banerjee, Rajabrata & Cavoli, Tony, 2020. "Foreign aid, institutional quality and economic growth: Evidence from the developing world," Economic Modelling, Elsevier, vol. 89(C), pages 444-463.
    3. Rasmane Ouedraogo & Windemanegda Sandrine Sourouema & Hamidou Sawadogo, 2021. "Aid, growth and institutions in Sub‐Saharan Africa: New insights using a multiple growth regime approach," The World Economy, Wiley Blackwell, vol. 44(1), pages 107-142, January.
    4. Chauvet, Lisa & Ehrhart, Hélène, 2018. "Aid and growth: evidence from firm-level data," Journal of Development Economics, Elsevier, vol. 135(C), pages 461-477.
    5. Ziyoda Asatullaeva & Reza Fathollah Zadeh Aghdam & Nisar Ahmad & Laylo Tashpulatova, 2021. "The impact of foreign aid on economic development: A systematic literature review and content analysis of the top 50 most influential papers," Journal of International Development, John Wiley & Sons, Ltd., vol. 33(4), pages 717-751, May.
    6. Jamie Bologna Pavlik & Benjamin Powell & Andrew T. Young, 2022. "Does aid cause changes in economic freedom?," Southern Economic Journal, John Wiley & Sons, vol. 89(1), pages 90-111, July.
    7. Muhammad Athar Nadeem & Zhiying Liu & Haji Suleman Ali & Amna Younis & Muhammad Bilal & Yi Xu, 2020. "Innovation and Sustainable Development: Does Aid and Political Instability Impede Innovation?," SAGE Open, , vol. 10(4), pages 21582440209, November.
    8. Temple, Jonathan R.W., 2010. "Aid and Conditionality," Handbook of Development Economics, in: Dani Rodrik & Mark Rosenzweig (ed.), Handbook of Development Economics, edition 1, volume 5, chapter 0, pages 4415-4523, Elsevier.
    9. Angeles, Luis & Neanidis, Kyriakos C., 2009. "Aid effectiveness: the role of the local elite," Journal of Development Economics, Elsevier, vol. 90(1), pages 120-134, September.
    10. Bandeira, Pablo, 2009. "El desarrollo institucional en el contexto de la ineficacia de la ayuda: ¿qué podemos hacer? [Promoting institutional development in the context of actual aid ineffectiveness: what can we do?]," MPRA Paper 13372, University Library of Munich, Germany.
    11. Cohen-Cole, Ethan B. & Durlauf, Steven N. & Rondina, Giacomo, 2012. "Nonlinearities in growth: From evidence to policy," Journal of Macroeconomics, Elsevier, vol. 34(1), pages 42-58.
    12. repec:elg:eechap:15325_15 is not listed on IDEAS
    13. Minh Tam Schlosky & Andrew Young, 2017. "Can foreign aid motivate institutional reform? An evaluation of the HIPC Initiative," Journal of Entrepreneurship and Public Policy, Emerald Group Publishing Limited, vol. 6(2), pages 242-258, August.
    14. Carl-Johan Dalgaard & Ola Olsson, 0. "Windfall Gains, Political Economy and Economic Development," Journal of African Economies, Centre for the Study of African Economies, vol. 17(suppl_1), pages -109.
    15. d’Aiglepierre, Rohen & Wagner, Laurent, 2013. "Aid and Universal Primary Education," Economics of Education Review, Elsevier, vol. 37(C), pages 95-112.
    16. Elena Groß & Felicitas Nowak‐Lehmann Danzinger, 2022. "What effect does development aid have on productivity in recipient countries?," Review of Development Economics, Wiley Blackwell, vol. 26(3), pages 1438-1465, August.
    17. Askarov, Zohid & Doucouliagos, Hristos, 2015. "Aid and institutions in transition economies," European Journal of Political Economy, Elsevier, vol. 38(C), pages 55-70.
    18. Tierney, Michael J. & Nielson, Daniel L. & Hawkins, Darren G. & Roberts, J. Timmons & Findley, Michael G. & Powers, Ryan M. & Parks, Bradley & Wilson, Sven E. & Hicks, Robert L., 2011. "More Dollars than Sense: Refining Our Knowledge of Development Finance Using AidData," World Development, Elsevier, vol. 39(11), pages 1891-1906.
    19. Maruta, Admasu Asfaw, 2019. "Can aid for financial sector buy financial development?," Journal of Macroeconomics, Elsevier, vol. 62(C).
    20. Hagen, Rune Jansen, 2014. "Rents and the Political Economy of Development Aid," Working Papers in Economics 07/14, University of Bergen, Department of Economics.
    21. Christopher Coyne & Abigail Hall, 2014. "The empire strikes back: Adam Smith, John Stuart Mill, and the Robust Political Economy of empire," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 27(4), pages 359-385, December.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:chinae:v:30:y:2022:i:2:p:1-27. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/iwepacn.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.