Project Aid and Firm Performance

This paper evaluates the effect of development project aid from the World Bank and China on firms’ sales growth using a large dataset of 110864 firms, mapped into six broad industrial clusters, spanning 121 countries between 2001 and 2016. We find, on average, no significant effect of the World Bank or Chinese ODA projects on the growth of firm sales. The outcome changes, however, when we differentiate across geographic regions and industrial sectors. Only Asian firms gain from the World Bank projects, whereas we do not find such differences for Chinese aid. Compared to sector-specific, region-specific aid from both sources positively affect firm performance. Moreover, firm operating in the transport sector seem to benefit from Chinese ODA projects, whereas firms operating in the mineral sector see their sales reduced after the Chinese intervention. To the best of our knowledge, this is the first study (1) to compare the effectiveness of the World Bank and Chinese aid on firm sales, and (2) to distinguish between project-specific and region specific aid and evaluate the contribution of both the World Bank and Chinese ODA projects through these channels.