Aid Projects and Firm Performance

• DOI: 10.1086/730829
• Publication Date: 2024-04-17T15:36:25Z
• Authors: Silvia Marchesi; Tania Masi; Saumik Paul
• Keywords: 0502 economics and business; 05 social sciences

This paper evaluates the effects of sub-national development aid projects from Chinaand the World Bank on firm performance, and considers the role of supply-side constraints ofthe firms as channels of transmission. We find that Chinese ODA projects increase firm sales: aone percent increase in Chinese ODA commitments increases firm sales growth by three percent.Moreover, we find some evidence that Chinese ODA intervention crowds out local firms operatingin the mineral sector, which is one of the most financed by China. We show that the positiveeffect of Chinese aid is stronger for firms lacking access to finance, suggesting that Chinese aidmay improve firm performance by releasing their financing constraints. Finally, we find no causaleffects between World Bank projects and firm performance.