Chinese foreign aid in Sub-Saharan Africa: an empirical investigation of the relationship between aid and Nighttime light growth.
Yang, Ziliang.
2016
- Despite its increasing magnitude and stark difference from the traditional Westernforeign aid, Chinese foreign aid in Sub-Saharan Africa (SSA) and its effect have rarely beenstudied empirically. In this paper, I use a time series dataset of Chinese and World Bank aidprojects for 3419 ADM2 regions in 41 countries between 2000 and 2011 to investigate therelationship between Chinese foreign aid and ... read moreeconomic growth in the context of SSA, andcompare this relationship to that of World Bank aid. Following Dreher and Lohmann (2015), Imeasure aid effectiveness using nighttime light as a proxy for economic growth at thesubnational level. I also follow Clemens et al. (2012) by 1) separating early impact aid from lateimpact aid, 2) replacing contemporaneous aid variable with a lagged aid variable, 3) firstdifferencing the dependent variable, and I build upon Clemens et al. (2012) by including bothADM2 and country-year fixed effects. Both the preferred model and robustness checks point tothe same puzzling results: 1) lags of aid variables are negatively associated with nighttime lightgrowth, 2) lags of aid variables are insignificant and have small magnitude, 3) lags of earlyimpact aid are even more negatively associated with nighttime light growth than lags of lateimpact aid. These unanticipated results are most likely due to a combination of endogeneityproblems, limitations of dataset, and misrepresentation of project heterogeneity.read less
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