Aid on Demand: African Leaders and the Geography of China's Foreign Assistance

51 Pages Posted: 28 Jul 2015

See all articles by Axel Dreher

Axel Dreher

Heidelberg University

Andreas Fuchs

University of Goettingen (Gottingen) - Faculty of Economics and Business Administration; Kiel Institute for the World Economy

Roland Hodler

University of St. Gallen; University of Oxford; CESifo (Center for Economic Studies and Ifo Institute)

Bradley Parks

College of William and Mary

Paul Raschky

Monash University - Department of Economics

Michael J. Tierney

College of William and Mary

Multiple version iconThere are 4 versions of this paper

Date Written: July 27, 2015

Abstract

This article investigates whether China’s foreign aid is particularly prone to political capture by political leaders of aid-receiving countries. Specifically, we examine whether more Chinese aid is allocated to the political leaders’ birth regions and regions populated by the ethnic group to which the leader belongs, controlling for indicators of need and various fixed effects. We have collected data on 117 African leaders’ birthplaces and ethnic groups and geocoded 1,650 Chinese development finance projects across 3,097 physical locations committed to Africa over the 2000-2012 period. Our econometric results show that current political leaders’ birth regions receive substantially larger financial flows from China than other regions. On the contrary, when we replicate the analysis for the World Bank, our regressions with region-fixed effects show no evidence of such favoritism. For Chinese and World Bank aid alike, we also find no evidence that African leaders direct more aid to areas populated by groups who share their ethnicity, when controlling for region-fixed effects.

Keywords: foreign aid, favoritism, aid allocation, Africa, China, official development assistance, georeferenced data, spatial analysis

JEL Classification: D730, F350, P330, R110

Suggested Citation

Dreher, Axel and Fuchs, Andreas and Hodler, Roland and Parks, Bradley and Raschky, Paul and Tierney, Michael J., Aid on Demand: African Leaders and the Geography of China's Foreign Assistance (July 27, 2015). CESifo Working Paper Series No. 5439. Available at SSRN: https://ssrn.com/abstract=2636223

Axel Dreher (Contact Author)

Heidelberg University ( email )

Grabengasse 1
Heidelberg, 69117
Germany

HOME PAGE: http://www.axel-dreher.de

Andreas Fuchs

University of Goettingen (Gottingen) - Faculty of Economics and Business Administration ( email )

Platz der Goettinger Sieben 3
Goettingen, 37073
Germany

Kiel Institute for the World Economy ( email )

Kiellinie 66
Kiel, Schleswig-Hosltein 24105
Germany

Roland Hodler

University of St. Gallen ( email )

Varnbuelstr. 14
Saint Gallen, St. Gallen CH-9000
Switzerland

University of Oxford ( email )

Mansfield Road
Oxford, Oxfordshire OX1 4AU
United Kingdom

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

Bradley Parks

College of William and Mary ( email )

No Address Available

Paul Raschky

Monash University - Department of Economics ( email )

Wellington Road
Clayton, Victoria 3
Australia

Michael J. Tierney

College of William and Mary ( email )

P.O. Box 8795
Williamsburg, VA 23185
United States

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