Impacts of Foreign Aid and Investment on Emerging Countries: Grid Cells of Nighttime Light Data Analysis of the Belt and Road Initiative Projects Effects in Central Asia

Abstract

This study investigates the direct and spillover economic impact of China’s Belt and Road Initiative (BRI) in Central Asia over the period 2012-2022. Remote sensing nighttime light data are utilized due to the inaccessibility of subnational GDP data in the region. The analysis is conducted at the 0.25° (longitude) × 0.25° (latitude) grid cell level using a Spatial Durbin Model (SDM). Results show that BRI projects significantly increase nighttime light luminosity in local cells and that the positive effects persist for at least two subsequent years. Strong spatial spillover effects are also observed in the results, reflected by the increased intensity of nighttime light in adjacent cells. Government effectiveness is positively correlated with economic performance, providing evidence to explain the heterogeneity of economic growth by country. Additionally, the model controls for fixed effects and spatial lags, ensuring robustness against endogeneity. The findings support the use of nighttime light as a proxy for economic activity and highlight the role of infrastructure-driven aid in promoting regional growth in landlocked and institutionally diverse economies like those in Central Asia.