# Are There Lasting Impacts of Aid to Poor Areas?

## Evidence for Rural China

### Shaohua Chen, Ren Mu and Martin Ravallion<sup>1</sup>

_Development Research Group, World Bank 1818 H Street NW, Washington DC_

**Summary:** The paper re-visits 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 non-project 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 small and statistically insignificant gains to mean consumption emerged in the longer-term — though in rough accord with the gain to permanent income. The use of community-based beneficiary selection greatly reduced the overall impact, given that the educated poor were under-covered. 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.

**Keywords:** Poor-areas, aid, credit, rural development, impact evaluation, China **JEL:** D91, H43, I32, O22

World Bank Policy Research Working Paper 4084, March 2008 _The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the view of the World Bank, its Executive Directors, or the countries they represent. Policy Research Working Papers are available online at http://econ.worldbank.org._

> 1 This study would not have been possible without the survey data collection effort over 10 years by the Rural Household Survey Team of China’s National Bureau of Statistics (NBS).  We are particularly grateful to Wang Ping Ping at NBS, who ably supervised the surveys.  The authors have benefited from discussions with Guido Imbens and the comments of Kathleen Beegle, Richard Blundell, Solveig Buhl, Shubham Chaudhuri, Richard Chiburis, Alan De Brauw, Quy-Toan Do, Gershon Feder, Emanuela Galasso, Garance Genicot, Stuti Khemani, Alice Mesnard, Alan Piazza, Dominique van de Walle and seminar participants at University College London, the Overseas Development Institute, the University of Namur, the Indian Statistical Institute, the Paris School of Economics and the World Bank. The support of the Bank’s Research Committee and the Knowledge for Change Trust Fund is gratefully acknowledged.  The paper’s findings, interpretations and conclusions are those of the authors and should not be attributed to the World Bank, its Executive Directors, or the countries they represent.