Revisiting environmental Kuznets curve: The effects of foreign aid on air quality in Africa

Abstract

The Environmental Kuznets Curve hypothesis suggests that an inverted U relationship exists between economic development and environmental pollution. However, this study shows that Chinese aid, particularly in the form of economic infrastructure in Africa, improved the local air quality and economic development simultaneously, even though Africa is still at the early stage of urbanization and industrialization. A battery of robustness checks, including instrumental variable estimation and permutation test with randomly assigned aid projects, further supports our findings. Therefore, aids in advanced economic infrastructure that improve resource consumption efficiency can mitigate the dilemma between growth and environment for emerging economies. (JEL: F35, O18, O55, Q53).