Long Live Friendship? The Long-Term Impact of the Soviet Aid on Sino-Russian Trade

This paper studies the long-term effect of aid on bilateral trade and provides a new mechanism for this effect - aid fosters inter-group affinity. Our empirical setting is the Soviet aid to China during the 1950s, namely the 156 program, when numerous large-scale industrial plants were constructed with the support from the Soviet Union. In a difference-in-differences framework, we find that Chinese cities received more aid in the program trade more with Russia than other countries in the 2000s. Then we provide a rich set of evidence suggesting that this relationship can be explained by the affinity mechanism