Aid Curse With Chinese Characteristics? Chinese Development Flows and Economic Reforms

40 Pages Posted: 1 Mar 2018

See all articles by Samuel Rueckert Brazys

Samuel Rueckert Brazys

University College Dublin (UCD) - School of Politics and International Relations

Krishna Chaitanya Vadlamannati

University College Dublin (UCD) - Department of Politics

Multiple version iconThere are 2 versions of this paper

Date Written: February 20, 2018

Abstract

The emergence of China as a major development partner requires a reassessment of traditional donor-recipient dynamics. In addition to using new rhetoric like “South-South cooperation” or “Win-Win”, China has also eschewed classifications and practices of the traditional donors of the Organization for Economic Cooperation and Development’s (OECD) Donor Assistance Committee (DAC). Yet this “new approach” and willful ignorance is unlikely to spare China from the same issues confronted by traditional donors. In this paper, we consider the extent to which Chinese development efforts may disincentivize difficult economic reforms by providing recipient governments with a budgetary cushion. Using panel data covering 122 countries during 2000-2014 period, we find that the presence and persistence of Chinese development aid inhibits broader economic policy reforms, after addressing endogeneity concerns using instrumental variable approach. These findings are robust to a number of alternative specifications, data, instruments and approaches and are suggestive of an institutional aid curse “with Chinese characteristics” as insidious as that which has plagued some traditional donor-recipient relationships.

Keywords: Development Aid, Economic Reforms, Endogeneity, China

Suggested Citation

Brazys, Samuel Rueckert and Vadlamannati, Krishna Chaitanya, Aid Curse With Chinese Characteristics? Chinese Development Flows and Economic Reforms (February 20, 2018). Available at SSRN: https://ssrn.com/abstract=3126779 or http://dx.doi.org/10.2139/ssrn.3126779

Samuel Rueckert Brazys

University College Dublin (UCD) - School of Politics and International Relations ( email )

Belfield
Dublin, 4
Ireland
+353-01-716-8387 (Phone)

HOME PAGE: http://www.ucd.ie/spire

Krishna Chaitanya Vadlamannati (Contact Author)

University College Dublin (UCD) - Department of Politics ( email )

Belfield
Dublin 4
Ireland

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