Aid Projects and Firm Performance
Date Published
Mar 18, 2025
Authors
Silvia Marchesi, Tania Masi, Saumik Paul
Publisher
University of Chicago Press
Citation
Marchesi, S., Masi, T., & Paul, S. (2025). Aid Projects and Firm Performance. Economic Development and Cultural Change, 73(3), 1251–1295. https://doi.org/10.1086/730829
Note: A version of this article was previously published as an AidData Working Paper.
Abstract
This paper evaluates the effects of subnational development aid projects from China and the World Bank on firm performance and considers the role of supply-side constraints of the firms as channels of transmission. We find that Chinese official development assistance (ODA) projects increase firm sales: a 1% increase in Chinese ODA commitments increases firm sales growth by 3%. Moreover, we find some evidence that Chinese ODA intervention crowds out local firms operating in the mineral sector, which is one of the most financed by China. We show that the positive effect of Chinese aid is stronger for firms lacking access to finance, suggesting that Chinese aid may improve firm performance by releasing a firm’s financing constraints. Finally, we find no causal effects between World Bank projects and firm performance.
