Working Paper
64

Connective Financing: Chinese Infrastructure Projects and the Diffusion of Economic Activity in Developing Countries

Date Published

Sep 11, 2018

Authors

Richard Bluhm, Axel Dreher, Andreas Fuchs, Bradley Parks, Austin Strange, Michael Tierney

Publisher

Citation

Richard Bluhm, Axel Dreher, Andreas Fuchs, Bradley Parks, Austin Strange, and Michael Tierney. 2018. Connective Financing: Chinese Infrastructure Projects and the Diffusion of Economic Activity in Developing Countries. AidData Working Paper #64. Williamsburg, VA: AidData at William & Mary.

Announcement

How do development projects influence the geographic distribution of economic activity within low-income and middle-income countries? Existing research focuses on the effects of Western development projects on inter-personal inequality and inequality across different subnational regions. However, China has recently become a major financier of economic infrastructure in Africa, Asia, Latin America, the Middle East, and Central and Eastern Europe, and it is unclear if these investments diffuse or concentrate economic activity. We introduce an original dataset of geo-located Chinese Government-financed projects in 138 countries between 2000 and 2014, and analyze the effects of these projects on the spatial distribution of economic activity within host countries. We find that Chinese development projects in general, and Chinese transportation projects in particular, reduce economic inequality within and between subnational localities. Our results suggest that Chinese investments in “connective infrastructure” produce positive economic spillovers that lead to a more equal distribution of economic activity in the localities where they are implemented.

Funding: This study was made possible with generous financial support from the John D. and Catherine T. MacArthur Foundation, Humanity United, the William and Flora Hewlett Foundation, the Academic Research Fund of Singapore’s Ministry of Education, the United Nations University World Institute for Development Economics Research (UNU-WIDER), the German Research Foundation (DFG), and the College of William andMary. We also acknowledge that this study was indirectly made possible through a cooperative agreement (AID-OAA-A-12-00096) between USAID’s Global Development Lab and AidData at the College of William and Mary under the Higher Education Solutions Network (HESN) Program, as it supported the creation of a spatial data repository and extraction tool which we used to execute our data analysis.

Bradley C. Parks

Bradley C. Parks

Executive Director

Mike Tierney

Mike Tierney

Co-Director of the Global Research Institute and Hylton Professor of Government and International Relations at the College of William & Mary

Austin Strange

Austin Strange

Ph.D. Candidate in Government at Harvard University

Andreas Fuchs

Andreas Fuchs

Senior Researcher at the Alfred-Weber-Institute for Economics at Heidelberg University

Axel Dreher

Axel Dreher

Professor of Economics and Chair of International and Development Politics at Heidelberg University

Richard Bluhm

Richard Bluhm

Assistant Professor at the Hannover Institute of Macroeconomics at Leibniz University