Scandinavian Working Papers in Economics
Working Papers in Economics,
University of Gothenburg, Department of Economics
No 667: Chinese aid and local corruption
Ann-Sofie Isaksson () and Andreas Kotsadam
Additional contact information
Ann-Sofie Isaksson: Department of Economics, School of Business, Economics and Law, Göteborg University, Postal: P.O. Box 640, SE 40530 GÖTEBORG, Sweden
Andreas Kotsadam: Ragnar Frisch Centre for Economic Research. Oslo, Norway
Abstract: Considering the mounting criticisms concerning Chinese aid practices, the present paper investigates whether Chinese aid projects fuel local-level corruption in Africa. To this end, we geographically match a new geo-referenced dataset on the subnational allocation of Chinese development finance projects to Africa over the 2000-2012 period with 98,449 respondents from four Afrobarometer survey waves across 29 African countries. By comparing the corruption experiences of individuals who live near a site where a Chinese project is being implemented at the time of the interview to those of individuals living close to a site where a Chinese project will be initiated but where implementation had not yet started at the time of the interview, we control for unobservable time-invariant characteristics that may influence the selection of project sites. The empirical results consistently indicate more widespread local corruption around active Chinese project sites. The effect, which lingers after the project implementation period, is seemingly not driven by an increase in economic activity, but rather seems to signify that the Chinese presence impacts local institutions. Moreover, China stands out from the World Bank and Western bilateral donors in this respect. In particular, whereas the results indicate that Chinese aid projects fuel local corruption but have no observable impact on local economic activity, they suggest that World Bank aid projects stimulate local economic activity without fuelling local corruption.
Keywords: China; aid; local corruption; Africa
50 pages, First version: June 2016. Revised: October 2016.
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