Income Distribution Effects of the Belt and Road Initiative

Abstract

The Belt and Road Initiative (BRI) adheres to the principles of inclusive development, shared business interests, and collaborative construction. This paper empirically investigates the impact of the BRI on domestic income inequality in participating countries using national panel data from 2008 to 2023 and employing a difference-in-differences methodology. The findings indicate that the BRI significantly reduces domestic income inequality in participating countries. This effect is consistent across different geographic locations but is more pronounced in countries with lower levels of economic development. The economic channel analysis reveals that the BRI facilitates trade, which, in turn, reduces income inequality by promoting the industrial upgrading and optimizing the comparative advantages of the host countries. The political channel analysis shows that the BRI enhances governance capacities in participating countries, further contributing to the reduction in income disparity. Extended analyses suggest that the BRI significantly boosts the economic development levels of participating countries, and this positive effect is uniformly distributed across various economies. These findings provide empirical support for the mutually beneficial industrial relationships and inclusive development fostered by the BRI between China and its participating countries.