Chinese Development Projects and Subnational Poverty
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2020-08-27
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en
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China’s emergence as a development financier presents renewed opportunity to study the impact of investment in infrastructure on global poverty and inequality. With a preference for investing in connective infrastructure and willingness to implement projects globally, China’s policies on aid delivery are distinct. Evident from the sectoral composition and geographical location of their development finance. This paper uses a 2SLS strategy that exploits differences in local exposures to a common overproduction shock originating in China’s steel industry to determine the local average treatment effect of Chinese infrastructure projects. Leveraging two sources of variation to form a shift-share style instrument to examine the short-term effects of Chinese development assistance on subnational and national poverty levels as measured by the International Wealth Index. Results suggest that infrastructure projects within the transport sector have a significant short-term poverty reducing effect of as high as a 3%. Which translates roughly to 18 thousand households lifted out of poverty in the mean region. A significant effect that is in line with theoretical considerations and previous empirical studies. This paper encourages traditional OECD donors to revaluate the importance of their aid budgets to further global development and reduce geographic inequalities.
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Faculteit der Managementwetenschappen