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

55 Pages Posted: 3 Jun 2020

See all articles by Richard Bluhm

Richard Bluhm

Leibniz University Hannover; UNU-MERIT; Maastricht Graduate School of Governance

Axel Dreher

Heidelberg University

Andreas Fuchs

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

Brad Parks

affiliation not provided to SSRN

Austin Strange

Harvard University, Faculty of Arts and Sciences, Department of Government

Michael J. Tierney

College of William and Mary

Multiple version iconThere are 3 versions of this paper

Date Written: May 2020

Abstract

This paper studies the causal effect of transport infrastructure on the spatial concentration of economic activity. Leveraging a new global dataset of geo-located Chinese government-financed projects over the period from 2000 to 2014 together with measures of spatial inequality based on remotely-sensed data, we analyze the effects of transport projects on the spatial distribution of economic activity within and between regions in a large number of developing countries. We find that Chinese-financed transportation projects reduce spatial concentration within but not between regions. In line with land use theory, we document a range of results which are consistent with a relocation of activity from city centers to their immediate periphery. Transport projects decentralize activity particularly strongly in regions that are more urbanized, located closer to the coast, and less developed.

Keywords: China, Development finance, foreign aid, infrastructure, spatial concentration, transport costs

JEL Classification: F15, F35, O18, O19, P33, R11, R12

Suggested Citation

Bluhm, Richard and Dreher, Axel and Fuchs, Andreas and Parks, Brad and Strange, Austin and Tierney, Michael J., Connective Financing - Chinese Infrastructure Projects and the Diffusion of Economic Activity in Developing Countries (May 2020). CEPR Discussion Paper No. DP14818, Available at SSRN: https://ssrn.com/abstract=3615581

Richard Bluhm (Contact Author)

Leibniz University Hannover ( email )

Institute of Macroeconomics
Koenigsworther Platz 1
Hannover, 30167
Germany

HOME PAGE: http://mak.uni-hannover.de

UNU-MERIT ( email )

Keizer Karelplein 19
Maastricht, 6211TC
Netherlands

Maastricht Graduate School of Governance ( email )

Keizer Karelplein 19
PO Box 616
Maastricht, 6200MD
Netherlands

Axel Dreher

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

Brad Parks

affiliation not provided to SSRN

No Address Available

Austin Strange

Harvard University, Faculty of Arts and Sciences, Department of Government ( email )

1737 Cambridge Street
Cambridge, MA 02138
United States

Michael J. Tierney

College of William and Mary ( email )

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

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