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Connective Financing: Chinese Infrastructure Projects and the Diffusion of Economic Activity in Developing Countries

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Listed:
  • Richard Bluhm

    (SoDa Laboratories, Monash University)

  • Axel Dreher

    (SoDa Laboratories, Monash University)

  • Andreas Fuchs

    (SoDa Laboratories, Monash University)

  • Bradley C. Parks

    (SoDa Laboratories, Monash University)

  • Austin M. Strange

    (SoDa Laboratories, Monash University)

  • Michael J. Tierney

    (SoDa Laboratories, Monash University)

Abstract

This paper studies the causal effect of transport infrastructure on the spatial concentration of economic activity. Leveraging a new global dataset of geo-located Chinese government-financed projects over the period from 2000 to 2014 together with measures of spatial inequality based on remotely-sensed data, we analyze the effects of transport projects on the spatial distribution of economic activity within and between regions in a large number of developing countries. We find that Chinese-financed transportation projects reduce spatial concentration within but not between regions. In line with land use theory, we document a range of results which are consistent with a relocation of activity from city centers to their immediate periphery. Transport projects decentralize economic activity particularly strongly in regions that are more urbanized, located closer to the coast, and less developed.

Suggested Citation

  • Richard Bluhm & Axel Dreher & Andreas Fuchs & Bradley C. Parks & Austin M. Strange & Michael J. Tierney, 2020. "Connective Financing: Chinese Infrastructure Projects and the Diffusion of Economic Activity in Developing Countries," SoDa Laboratories Working Paper Series 2020-06, Monash University, SoDa Laboratories.
    • Handle: RePEc:ajr:sodwps:2020-06
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    More about this item

    Keywords

    transport costs; infrastructure; development finance; spatial concentration; China;
    All these keywords.

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F35 - International Economics - - International Finance - - - Foreign Aid
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • P33 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - International Trade, Finance, Investment, Relations, and Aid
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations

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