Institutional Quality,Foreign Aid and Economic Growth in Recipient Countries

摘要

Foreign aid is an important aspect of China’s Belt and Road Initiative (BRI)for enhancing two-way cooperation with BRI countries. Based on the panel data of China’sforeign aid over the period 2000-2014, this paper employs the Worldwide GovernanceIndicators (WGI) to conduct an empirical study on the economic growth effects of China’sforeign aid and recipient countries’ institutional quality with the endogeneity of aid takeninto account. Results of our empirical study suggest that (i) China’s foreign aid, especiallyinfrastructure aid, can effectively promote economic growth in recipient countries;(ii)sound institutional development offers an important assurance for economic growth inrecipient countries;(iii) sample-specific regression reveals that the institutional quality ofrecipient countries can significantly influence the economic growth effects of China’s foreignaid, especially economic infrastructure aid for recipient countries in Asia and Europe.To improve aid effectiveness and quality, China needs to improve aid structure, superviseaid program implementation, and mitigate the impact of institutional risks in recipientcountries.