Working Papers in Economics,
University of Gothenburg, Department of Economics

Abstract: Recent empirical evidence suggests that Chinese development finance may be particularly prone to elite capture and patronage spending. If aid ends up in the pockets of political elites and their ethno-regional networks, this may exacerbate grievances based in horizontal inequalities. Against this background, the present study investigates whether the implementation of Chinese development projects fuels local ethnic identities. A new geo-referenced dataset on the subnational allocation of Chinese development finance projects to Africa over the 2000-2014 period is geographically matched with survey data for 94,954 respondents from 18 African countries. The identification strategy consists in comparing sites where a Chinese project was under implementation at the time of the interview, to sites where a Chinese project will appear subsequently but where implementation had not yet started at the time of the survey. While suggesting substantial country variation, the empirical results indeed suggest that, on average, living near an ongoing Chinese project fuels ethnic identification. I consider two mechanisms possibly underlying this result. First, competition for the inflow of resources that aid constitutes could mobilize ethnic identities across the board. Second, perceptions of ethnically biased aid may fuel ethnic identities in groups perceiving themselves as disadvantaged. Two observations speak in favour of the latter mechanism. First, the estimated effect is not uniform across groups, but driven by people belonging to the out-group. Second, there is no indication of an equivalent pattern when considering development projects of other donors. Replicating the key analysis for World Bank projects as well as for other bilateral donors, the results in fact indicate the reverse, i.e. that living near an ongoing as opposed to a future project comes with weaker ethnic identification.

Keywords: China; aid; ethnic identities; Africa

JEL-codes: F35; O19; O55

38 pages, April 2019

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