“Post-disaster aid and development of the manufacturing sector: Lessons from a natural experiment in China”

“Post-disaster aid and development of the manufacturing sector: Lessons from a natural experiment in China”

Erwin Bult, Lih Xu and Xiaobo Zhang

In: European Economic Review, Vol. 101, January 2018, Pages 441-458

Bult et al. adopt a disaggregate approach to study the link between aid and Dutch Disease dynamics, using a natural experiment in China. Specifically, they 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, they 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.