Aid on Demand: African Leaders and the Geography of China's Foreign Assistance
Nov 1, 2014
Axel Dreher, Andreas Fuchs, Roland Hodler, Bradley C. Parks, Paul A. Raschky, Michael J. Tierney
Dreher, Axel, Andreas Fuchs, Roland Hodler, Bradley C. Parks, Paul A. Raschky and Michael J. Tierney. 2016. Aid on Demand: African Leaders and the Geography of China's Foreign Assistance. AidData Working Paper #3 Revised. Williamsburg, VA: AidData at William & Mary.
Update: A revised version of this paper has been published in the Journal of Development Economics.
This article investigates whether China’s foreign aid is particularly prone to capture by political leaders of aid-receiving countries. We examine whether more Chinese aid is allocated to the birth regions of political leaders and regions populated by the ethnic groups to which leaders belong, controlling for indicators of need and various fixed effects. We have collected data on 117 African leaders’ birthplaces and ethnic groups and have geocoded 1,650 Chinese development finance projects across 3,097 physical locations that were committed to Africa over the 2000–2012 period. Our econometric results show that when leaders hold power their birth regions receive substantially more funding from China than other subnational regions. We also find—less robust—evidence that African leaders direct more Chinese aid to areas populated by individuals who share their ethnicity. However, when we replicate the analysis for the World Bank, our regressions show no evidence of favoritism. We also evaluate the impact of Chinese aid on regional development, exploiting time variation in the amount of Chinese aid that results from China’s production of steel and geographical variation in the probability that a subnational region will receive such aid. We find that Chinese aid improves local development outcomes, as measured by per-capita nighttime light emissions at the first and second subnational administrative level. We therefore conclude that China’s foreign aid program has both distributional and developmental consequences for Africa.
Note: Working paper revised October 2016.
Funding: The authors thank Humanity United and the Hewlett Foundation for the generous funding that made this research possible. Axel Dreher and Andreas Fuchs are grateful for generous support from the German Research Foundation (DFG) in the framework of the project “The Economics of Emerging Donors in Development Cooperation” at Heidelberg University (DR 640/5-1 and FU 997/1-1). Roland Hodler and Paul Raschky are grateful for generous support from the Australian Research Council (ARCDP150100061).
Geocoded China Data
AidData's Chinese Official Finance to Africa Dataset, 2000-2012, Version 1.1.1
This is a sub-nationally georeferenced dataset of Chinese official finance activities that spans 50 African countries over the 2000-2012 period. It includes 1,952 Chinese development finance projects across 3,545 physical locations.
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Diving into the Details: What “Aid on Demand” Says and Doesn’t Say About China in Africa
We're delighted to see that the paper provoked a fair amount of media coverage and debate among scholars. However, a lack of familiarity with the data, methods, and findings has led to inaccurate reporting and confusion. We’d like to briefly clarify several matters of fact.