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Can Aid Buy Foreign Public Support? Evidence from Chinese Development Finance

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  • Dreher, Axel
  • Wellner, Lukas
  • Fuchs, Andreas
  • Parks, Bradley
  • Strange, Austin

Abstract

Bilateral donors use foreign aid to pursue soft power. We test the effectiveness of aid in reaching this goal by leveraging a new dataset on the precise commitment, implementation, and completion dates of Chinese development projects. We use data from the Gallup World Poll for 126 countries over the 2006-2017 period and identify causal effects with (i) an event-study model that includes high-dimensional fixed effects, and (ii) instrumental-variables regressions that rely on exogenous variation in the supply of Chinese government financing over time. Our results are nuanced and depend on whether we focus on subnational jurisdictions, countries, or groupings of countries. On average, we estimate that the completion of one additional development project in a recipient country increases public support for the Chinese government by more than 3 percentage points in the short run and 0.2 percentage points in the longer run.

Suggested Citation

  • Dreher, Axel & Wellner, Lukas & Fuchs, Andreas & Parks, Bradley & Strange, Austin, 2022. "Can Aid Buy Foreign Public Support? Evidence from Chinese Development Finance," CEPR Discussion Papers 17128, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:17128
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    2. Vrolijk, Kasper, 2023. "How does globalisation affect social cohesion?," IDOS Discussion Papers 5/2023, German Institute of Development and Sustainability (IDOS).

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    More about this item

    Keywords

    Development finance; Foreign aid; Aid events; Public opinion; Government approval; Soft power; China; Gallup world poll;
    All these keywords.

    JEL classification:

    • F35 - International Economics - - International Finance - - - Foreign Aid
    • F59 - International Economics - - International Relations, National Security, and International Political Economy - - - Other
    • H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations
    • P33 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - International Trade, Finance, Investment, Relations, and Aid

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