China’s Aid and People’s Perception of Inequality in South Africa

Abstract

This paper is focusing on the relationship between China’s aid to South Africa and people’s perception of inequality in recipient areas, and its mechanism. South Africa is African’s largest economy and second largest China’s aid recipient. However, in the meantime, South Africa is a country with high inequality and a large amount of people are living under the poverty line. This paper is focusing on subjective inequality. This paper proposes that China’s aid can reduce people’s perception of inequality by promoting employment therefore increases people’s prospect of upward mobility. AidData’s China’s aid dataset and South Africa Social Attitude Survey are used to test this theory. The result is that China’s aid decreases perception of inequality in recipient areas, however, the result varies among ethnic groups. To avoid endogenous, this paper also uses China’s steel production as an instrument variable. This paper also uses different measurement of aid, different methods, different attitudes and different instruments to test the robustness. The result is robust. However, the effect of mechanism—employment is weak.