Are There Lasting Impacts of Aid to Poor Areas? Evidence from Rural China

The paper revisits the site of a large,
World Bank-financed, rural development program in China 10
years after it began and four years after disbursements
ended. The program emphasized community participation in
multi-sectoral interventions (including farming, animal
husbandry, infrastructure and social services). Data were
collected on 2,000 households in project and nonproject
areas, spanning 10 years. A double-difference estimator of
the program's impact (on top of pre-existing
governmental programs) reveals sizeable short-term income
gains that were mostly saved. Only modest gains to mean
consumption emerged in the longer term-in rough accord with
the gain to permanent income. Certain types of households
gained more than others. The educated poor were
under-covered by the community-based selection
process-greatly reducing overall impact. The main results
are robust to corrections for various sources of selection
bias, including village targeting and interference due to
spillover effects generated by the response of local
governments to the external aid.