Post-disaster aid and development of the manufacturing sector: Lessons from a natural experiment in China
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We adopt a disaggregate approach to study the link between aid and Dutch Disease dynamics, using a natural experiment in China. Specifically, we examine whether post disaster aid provided to a subsample of Chinese counties, devastated by an earthquake in 2008, affects the sectoral composition of local economies. Using different methods we consistently find that counties receiving (more) aid - even "nearby counties" not directly damaged by the earthquake - tend to suffer from a contraction of the manufacturing sector. Innovative features of the paper include its regional perspective; its identification strategy (resting on a special provision in Chinese policy - pairwise aid); and its focus on Dutch disease effects in the context of post-disaster aid. (C) 2017 Published by Elsevier B.V.
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