Post-disaster aid and development of the manufacturing sector: Lessons from a natural experiment in China

Erwin Bulte, Lihe Xu*, Xiaobo Zhang

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

2 Citations (Scopus)

Abstract

We adopt a disaggregate approach to study the link between aid and Dutch Disease dynamics, using a natural experiment in China. Specifically, we examine whether post-disaster aid provided to a subsample of Chinese counties, devastated by an earthquake in 2008, affects the sectoral composition of local economies. Using different methods we consistently find that counties receiving (more) aid — even “nearby counties” not directly damaged by the earthquake — tend to suffer from a contraction of the manufacturing sector. Innovative features of the paper include its regional perspective; its identification strategy (resting on a special provision in Chinese policy—pairwise aid); and its focus on Dutch disease effects in the context of post-disaster aid.
Original languageEnglish
Pages (from-to)441-458
JournalEuropean Economic Review
Volume101
DOIs
Publication statusPublished - 1 Jan 2018

Keywords

  • Aid
  • China
  • Dutch disease
  • Growth

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