Does the BRI contribute to poverty reduction in countries along the Belt and Road? A DID-based empirical test

Abstract

AbstractMost countries along the Belt and Road are developing countries that face pronounced challenges due to poverty. The Chinese government has committed to implementing the Belt and Road Initiative (BRI) to establish a ‘Road to Poverty Reduction’. This study explores the impact of the BRI on poverty reduction in participating countries as well as the mechanisms underlying this impact. This research is of great significance to the continuing implementation of the BRI and global poverty governance. Based on a panel dataset extending from 2005 to 2019 and encompassing 151 countries, this article uses the difference-in-differences method to examine the Initiative’s impact and conducts heterogeneity analysis to explore the mechanism underlying this impact in further detail. This approach results in four findings. First, joining the BRI can significantly reduce poverty rates in these countries. Second, the policy effect exhibits a time lag. In the long term, the poverty reduction effect becomes more significant. Third, the BRI can significantly reduce poverty in countries neighbouring China and in lower-middle-income countries. The Land Silk Road Economic Belt and the 21st-Century Maritime Silk Road distinctly reduce poverty. Fourth, the BRI contributes to poverty reduction in BRI countries by facilitating trade, enhancing financial and credit systems, increasing China’s greenfield investment, and establishing digital infrastructure. Additionally, the BRI promotes poverty reduction through increased bilateral visits and technical cooperation, whereas knowledge sharing remains an area in need of further development. Through theoretical analysis and empirical tests, this article evaluates the policy effect of the BRI on poverty alleviation, tests the underlying mechanism, and responds to some concerns expressed by the international community. The findings of this article provide a feasible direction for improving the ability of the BRI to reduce poverty more effectively in the future and thus achieve the United Nations’ sustainable development goals (SDGs).