Thursday, June 10, 2021

Evaluating the Impact of China-Financed Power Projects on Electricity Access

This guest blogpost is by SAIS PhD student Keyi Tang 

Photo credit: ZSM
In the last decade, China has overtaken the World Bank and the African Development Bank to become the biggest financier of infrastructure projects in sub-Saharan Africa. The CARI loan database now housed at Boston University provides extensive data on these projects. Yet little research has been done on how Chinese loans affect the social welfare of African countries. Africa is the region with the highest percent of people who do not have access to electricity. Electric power is the second largest sub-sector in Chinese lending, making up 20 percent of all loans (transport makes up 54 percent). 

Has Chinese lending improved the access to electricity for Africans? This blogpost proposes a research idea that attempts to answer this question using the SAIS-CARI China-Africa Loan Data and other databases. We hope other researchers will take up this challenge.

Research period: 2010-2019

Although SAIS-CARI documents China-financed energy projects in Africa since 2000, the bulk of the loan projects are recorded as being signed post-2010. A focus on the 2010-2019 period could allow a higher number of samples, which translates to more observable events. 

Unit of analysis:

Because the SAIS-CARI data is at the country level, the easiest way to answer the question is to look at the impacts of China-financed energy projects in different African countries at an aggregate level. Researchers can also use the subnational unit of analysis by searching the subnational location of these projects through Google Map.

Databases

Variables

Name

Database

Note

Dependent Variable

Proportion of population with access to electricity

International Energy Agency

Access to electricity by country and year, 2000-2019

Main Independent Variable

China-financed energy projects

SAIS-CARI China-Africa Loan Database

China’s loan to Africa, by country, year, and sector, 2000-2019

Control Variables

OECD countries’ bilateral finance to African countries’ energy projects

OECD Development Finance Data

By recipient country, donor, year, and sector, 2010-2019

Spatial distribution of population and population density

Worldpop

Other socio-economic and geographical indicators that might influence access to electricity through channels other than investment on energy infrastructure.

 

Armed conflicts location and event data

ACLED Database

Nighttime lights

VIIRS Data

GDP per capita, PPP, by country and year

The World Bank

 

Mines in African district

Data in Space project

 

International commodity price by year

The IMF Primary Commodity Prices

 

Empirical strategy:


The following econometric methods are generally applied to evaluate the impact of large-scale infrastructure. Researchers can check the literature below.

a. Ordinary least square (OLS):  Humphrey & Michaelowa (2019)
b. Difference-in-differences: Martorano et al. (2020), Tang & Shen (2020)
c. Instrumental variables: Duflo & Pande (2007)

If you do undertake this research, send us a copy at sais-cari@jhu.edu!

Helpful References:

Duflo, Esther and Rohini Pande. (2007). Dams. The Quarterly Journal of Economics, Volume 122, Issue 2, Pages 601–646.

Humphrey, Chris and Katharina Michaelowa. (2019). China in Africa: Competition for traditional development finance institutions? World Development, Volume 120, Pages 15-28.

Martorano, B., Metzger, L., & Sanfilippo, M. (2020). Chinese development assistance and household welfare in Sub-Saharan Africa. World Development, 129, 104909.

Tang, Keyi & Yingjiao Shen. (2020). Do China-financed dams in Sub-Saharan Africa improve the region's social welfare? A case study of the impacts of Ghana's Bui Dam. Energy Policy, Volume 136, 111062.

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