Chinese Development Aid and Agricultural Productivity: Evidence from Tanzania

Improvement in agricultural productivity plays a key role in the process of economic development. Investment in critical infrastructure has been documented in the literature as one of the pathways to boost agricultural productivity. This paper empirically investigated whether foreign aid aimed at economic and social infrastructure can help improve agriculture productivity in Tanzania. To do so the paper combined household panel data with rich farm level information with geocoded Chinese development projects. The paper then exploits the within village level variation in the number of Chinese financed development projects in a panel fixed effects model combined with an instrumental variable strategy to examine their effects on on agricultural productivity. We find a positive effect on agricultural productivity in villages that are located within 25km of these projects. These effects are mainly driven by economic sector projects.