Research On The Economic Growth Effect Of China’s Aid

After the Second World War,international development assistance has gradually become one of the important development interventions and has played an increasingly important catalytic role in promoting economic and social development in developing countries.Aid,as a major source of external capital,is often considered as the main tool for promoting economic growth in neoclassical economic theory.Howerver,years of experience have shown that few countries have grown from less developed economies on aid,and there are still many countries that have received large amounts of aid that suffer from economic stagnation.The limitations of using economic aggregates as a measure to evaluate the economic growth effects of aid have gradually been revealed.The more important economic goal of aid is to help recipient countries enhance their independent development capacity,effectively improve people’s livelihood,and promote their economic development and social progress.Many lagging countries can achieve high growth through technological catch-up,but such catch-up always requires some type of capacity building as a prerequisite.The economic growth effect of aid based on the capacity perspective is more worthy of attention to reveal in essence.Based on the economic growth theory,we take the evolution of the production function in the growth model as the entry point,analyze and summarize the main factors affecting economic growth,combine the main characteristics of various types of sectorspecific aid,define infrastructure,human capital accumulation and total factor productivity as the basic capabilities that can promote a country’s economic development,and build a theoretical analysis framework that includes aid,basic capabilities and economic growth.Using the Ramsey model as basic model,endogenizing exogenous technologies through two paths,namely endogenous human capital accumulation and endogenous knowledge accumulation,to theoretically reveal the long-term impact of aid on the economic growth of recipient countries and the underlying mechanism.On the basis of theoretical analysis,panel data of 130 recipient countries from 2000-2014 are selected as research samples to test the impact effects of China’s foreign aid in various sectors on economic growth and various types of basic capabilities in different regions,and finally to make a comprehensive evaluation of the economic growth effects of Chinese aid.The research conclusions drawn in this paper mainly include.(1)At the overall level,China’s foreign aid can promote the economic growth of recipient countries by improving their basic capacity.Among the three types of aid,the aid that plays a key role is mainly social infrastructure aid.As time goes by,China’s foreign aid will play an increasingly important role in promoting the basic capacity and economic growth of recipient countries.(2)At the regional level,China’s foreign aid only promotes economic growth in Asia and Africa.China’s foreign aid mainly promotes the economic growth of Asia by promoting the accumulation of human capital and the improvement of total factor productivity.The aid that plays a key role is social infrastructure aid and productive sector aid.The internal mechanism of China’s foreign aid to promote the economic growth in Africa is mainly to improve the level of human capital in Africa,in which the key aid is social infrastructure aid,economic infrastructure aid and productive sector aid also play a certain role.(3)In terms of the impact of various types of aid on the basic capacity of recipient countries,in the short term,productive sector aid and economic infrastructure aid play a key role in improving the level of infrastructure,among which economic infrastructure aid plays a stronger role;The aid to promote human capital accumulation is mainly social infrastructure aid,economic infrastructure aid and productive sector aid also play a catalytic role;Productive sector aid and economic infrastructure aid still play a major role in promoting total factor productivity,but productive sector aid plays a more significant role in promoting total factor productivity.(4)In terms of the impact of various types of aid on the basic capacity of recipient countries in different regions,China’s foreign aid only has a significant positive impact on the improvement of infrastructure in South America,and social infrastructure aid plays a key role;In addition,productive sector assistance would improve Africa’s infrastructure endowment in the short term.In terms of improving human capital accumulation,China’s assistance plays a role in promoting human capital accumulation in both Africa and Asia.In Africa,it mainly promotes human capital accumulation in social infrastructure,while in Asia,it mainly promotes human capital accumulation in productive sectors,followed by social infrastructure.In terms of improving total factor productivity,China’s foreign aid only promoted the level of Total factor productivity in Asia,and the productive sector aid played a key role.The findings of this paper reveal the impact of aid on economic growth in different regions and the underlying mechanisms,and the uniqueness of the growth effects of aid across regions and the underlying mechanisms have implications for donors to optimize their aid programs.It enables donors to accurately identify the most effective type of aid to enhance the basic capacity of recipient countries based on the development of their basic capacity,so as to formulate the optimal path to enhance the recipient countries’ own development capacity and economic growth.This paper provides a new way to understand the economic growth effect of aid.It is better to identify the economic effect of aid from the essence by taking basic capacity as the starting point,which is more consistent with the fundamental purpose of foreign aid.The research conclusion of this paper complements the existing research and comprehensively considers the aid effect of three types of specific sector aid in different regions,especially the economic growth effect of productive sector aid,which is often neglected in the existing research.Existing research emphasis on the importance of infrastructure sector support to economic growth,this paper found that the economic infrastructure in the long run can sometimes play economic effect,when a country has a certain production base,social infrastructure aid more effectively to promote economic growth,and for the region,is more effective in the productive sector to promote economic growth.In addition,the theoretical part explains the process of constant internalization of basic capacity,which can explain that if aid can improve the basic capacity of recipient countries,it can promote the long-term economic growth of recipient countries.