Chinese Aid and Local Employment in Africa

Abstract

China has played an increasingly important role in global aid. The literature finds that Chinese aid boosts economic growth and also has a deep social impact on residents in the recipient countries. However, the ways in which local residents are involved in Chinese projects and affected in such a profound way have not been examined clearly. This paper sheds light on the first-order question regarding the impact of Chinese infrastructure aid projects on local employment. We use spatial and temporal variations in Chinese infrastructure aid projects and different waves of household surveys in 10 African countries during the period 2000–14 to identify the change in individual employment after local Chinese projects become active, based on a difference-in-differences type of estimation. We find that the impact is mostly short-term during project construction. Local employment increases by two percentage points in the first year and by three percentage points in the second year after Chinese projects start. This effect diminishes after the third year. Chinese aid projects are likely to create job opportunities for local residents both directly and indirectly through relevant sectors, as more employment is observed for manual labor, professional, technical, and managerial positions, and also in the service sector. More year-round and cash-earning jobs are created. The different types of infrastructures all increase short-term employment significantly, while the effects of schools, hospitals, and water and power facilities are also large in the longer term. To isolate the impact of Chinese aid projects, we also address potential confounds from other local developmental resources in various ways.