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

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  • Bulte, Erwin
  • Xu, Lihe
  • Zhang, Xiaobo

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.

Suggested Citation

  • Bulte, Erwin & Xu, Lihe & Zhang, Xiaobo, 2018. "Post-disaster aid and development of the manufacturing sector: Lessons from a natural experiment in China," European Economic Review, Elsevier, vol. 101(C), pages 441-458.
    • Handle: RePEc:eee:eecrev:v:101:y:2018:i:c:p:441-458
    DOI: 10.1016/j.euroecorev.2017.10.019
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    Cited by:

    1. Jinqian Deng & Yue Gu & Na Zhang, 2024. "Has China’s Pilot Policy of Farmland Management Right Mortgage Loan Promoted County Agricultural Economic Growth?," Land, MDPI, vol. 13(6), pages 1-20, June.
    2. Huang, Lulu & Liu, Qiannan & Tang, Yugang, 2024. "Long-term economic impact of disasters: Evidence from multiple earthquakes in China," World Development, Elsevier, vol. 174(C).
    3. Zou Wang & Fei Wang, 2023. "Well-being Effects of Natural Disasters: Evidence from China’s Wenchuan Earthquake," Journal of Happiness Studies, Springer, vol. 24(2), pages 563-587, February.
    4. Wang, Jingwen & Shen, Guangjun & Tang, Dunzhe, 2021. "Does tax deduction relax financing constraints? Evidence from China's value-added tax reform," China Economic Review, Elsevier, vol. 67(C).
    5. Sven Kunze, 2021. "Unraveling the Effects of Tropical Cyclones on Economic Sectors Worldwide: Direct and Indirect Impacts," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 78(4), pages 545-569, April.

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    More about this item

    Keywords

    Aid; Growth; Dutch disease; China;
    All these keywords.

    JEL classification:

    • F35 - International Economics - - International Finance - - - Foreign Aid
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology

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