Foreign Aid Shocks as a Cause of Violent Armed Conflict

32 Pages Posted: 12 Feb 2011

See all articles by Michael Findley

Michael Findley

Brigham Young University - Department of Political Science

Rich Nielsen

Harvard University

Tara Candland

affiliation not provided to SSRN

Daniel L. Nielson

Brigham Young University

Zachary S. Davis

affiliation not provided to SSRN

Date Written: September 16, 2010

Abstract

In this study we resolve part of the confusion over how foreign aid affects armed conflict. We argue that aid shocks – severe decreases in aid revenues – inadvertently shift the domestic balance of power and potentially induce violence. During aid shocks, potential rebels gain bargaining strength vis-à-vis the government. To appease the rebels, the government must promise future resource transfers, but the government has no incentive to continue its promised transfers if the aid shock proves to be temporary. With the government unable to credibly commit to future resource transfers, violence breaks out. Using AidData’s comprehensive dataset of bilateral and multilateral aid from 1981-2005, we evaluate the effects of foreign aid on violent armed conflict. In addition to rare-event logit analysis, we employ matching methods to account for the possibility that aid donors anticipate conflict. The results show that negative aid shocks significantly increase the probability of armed conflict onset.

Keywords: Foreign Aid Shocks, Armed Conflict, Credible Commitments, Matching

Suggested Citation

Findley, Michael and Nielsen, Rich and Candland, Tara and Nielson, Daniel L. and Davis, Zachary S., Foreign Aid Shocks as a Cause of Violent Armed Conflict (September 16, 2010). Available at SSRN: https://ssrn.com/abstract=1759410 or http://dx.doi.org/10.2139/ssrn.1759410

Michael Findley (Contact Author)

Brigham Young University - Department of Political Science ( email )

745 SWKT
Provo, UT 84602
United States
801.422.5317 (Phone)

HOME PAGE: http://politicalscience.byu.edu/faculty/mfindley/

Rich Nielsen

Harvard University ( email )

1875 Cambridge Street
Cambridge, MA 02138
United States

Tara Candland

affiliation not provided to SSRN ( email )

Daniel L. Nielson

Brigham Young University ( email )

Provo, UT 84602
United States

Zachary S. Davis

affiliation not provided to SSRN ( email )

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