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Chinese aid and local corruption

Author

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  • Isaksson, Ann-Sofie

    (Department of Economics, School of Business, Economics and Law, Göteborg University)

  • Kotsadam, Andreas

    (Ragnar Frisch Centre for Economic Research. Oslo, Norway)

Abstract

Considering the mounting criticisms concerning Chinese aid practices, the present paper investigates whether Chinese aid projects fuel local-level corruption in Africa. To this end, we geographically match a new geo-referenced dataset on the subnational allocation of Chinese development finance projects to Africa over the 2000-2012 period with 98,449 respondents from four Afrobarometer survey waves across 29 African countries. By comparing the corruption experiences of individuals who live near a site where a Chinese project is being implemented at the time of the interview to those of individuals living close to a site where a Chinese project will be initiated but where implementation had not yet started at the time of the interview, we control for unobservable time-invariant characteristics that may influence the selection of project sites. The empirical results consistently indicate more widespread local corruption around active Chinese project sites. The effect, which lingers after the project implementation period, is seemingly not driven by an increase in economic activity, but rather seems to signify that the Chinese presence impacts local institutions. Moreover, China stands out from the World Bank and Western bilateral donors in this respect. In particular, whereas the results indicate that Chinese aid projects fuel local corruption but have no observable impact on local economic activity, they suggest that World Bank aid projects stimulate local economic activity without fuelling local corruption.

Suggested Citation

  • Isaksson, Ann-Sofie & Kotsadam, Andreas, 2016. "Chinese aid and local corruption," Working Papers in Economics 667, University of Gothenburg, Department of Economics, revised Oct 2016.
    • Handle: RePEc:hhs:gunwpe:0667
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    Keywords

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    JEL classification:

    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • F35 - International Economics - - International Finance - - - Foreign Aid
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa

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