The distributive impacts of the Belt and Road Initiative

Abstract

AbstractThe mission of the Belt and Road Initiative (BRI) is to achieve shared prosperity through cross‐border trade, investment flows, connectivity, people bond, and policy coordination. This motivates us to explore and evaluate the distributive effects of trade and investments under the BRI, as it offers a quasi‐natural experiment for impact evaluation by taking the BRI economies as the treatment group and other countries as the control group. Estimation results show that the BRI has generated benign distributive impacts, as the Gini estimates in BRI economies are significantly reduced after the implementation of the BRI. Further, the benign distributive impacts are found to come from imports from China. More specifically, imports from China that are complementary to local labor inputs are positively correlated with labor participation, thereby helping raise the labor share in national income and reduce income inequality. Conversely, imports of machinery, agricultural products, minerals, and so on from China are found to be negatively correlated with the GDP share of the primary industry. In other words, they help promote industrialization and urbanization in BRI economies, which are expected to lead to better income distribution in the long run.