By Wesley Cash
The recent proliferation of Chinese foreign aid in Africa has raised many concerns about China’s potentially exploitative economic and political intentions. This paper empirically tests the effectiveness of Chinese foreign aid by measuring its effect on child labor participation in developing countries. Using a difference-in-differences-like identification strategy at the subnational level, I compare child labor participation in regions that receive Chinese aid prior to being surveyed with child labor participation in regions that receive aid within the sample period after being surveyed. Using this method, I find a significant negative causal effect of Chinese aid on child labor participation. A conservative interpretation indicates that the presence of at least one aid project reduces regional child labor participation rates by 26.3%. This paper additionally investigates the potential role of education and wealth as mechanisms and finds mixed results. I then replicate the main analysis for aid from the World Bank and find insignificant results. This paper suggests that Chinese aid is not necessarily exploitative and that non-traditional aid practices may have as positive, if not more positive, humanitarian consequences on the developing world as traditional Western aid practices do.
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