Foreign Aid Shocks as a Cause of Violent Armed Conflict

Authors


  • We thank Robert Bates, Andrew Coe, David Davis, Paul Diehl, Matthew Kocher, Jim Kuklinski, Rebecca Nielsen, Robert Powell, Carie Steele, Beth Simmons, Michael Tierney, Dustin Tingley, Brian Urlacher, members of the Project Level Aid Database (PLAID) research team at Brigham Young University, participants at the 2007 annual meetings of the International Studies Association, and five anonymous reviewers at the AJPS for helpful comments and advice. Richard Nielsen is supported by a National Science Foundation Graduate Research Fellowship. AidData (formerly known as Project-Level Aid or PLAID) was supported by the Bill & Melinda Gates Foundation; the William and Flora Hewlett Foundation; National Science Foundation grant SES-0454384; the College of William and Mary; and the College of Family, Home and Social Sciences, the Department of Political Science, and the David M. Kennedy Center for International Studies at Brigham Young University. Replication materials and a Supporting Information appendix are available at http://dvn.iq.harvard.edu/dvn/dv/rnielsen and http://politicalscience.byu.edu/faculty/mfindley/.

Richard Nielsen can be contacted through the Department of Government, Harvard University, 1737 Cambridge St., Cambridge, MA 02138 (nielsen.rich@gmail.com). Michael Findley (mikefindley@byu.edu), Zachary Davis (zacharysdavis@gmail.com), Tara Candland (taracandland@gmail.com), and Daniel Nielson (dan_nielson@byu.edu) can be contacted through the Department of Political Science, Brigham Young University, 745 Kimball Tower/PO Box 25545, Provo, UT 84602. Richard Nielsen contributed at all stages of the project and made the primary contribution to the empirics. Michael Findley contributed at all stages of the project and made the primary contribution to the theory. Zachary Davis contributed to theoretical development and research for the Mali case study. Tara Candland helped with data management and initial empirical analysis. Daniel Nielson contributed to the theoretical development and empirical strategy and managed the compilation of AidData and its financing. Davis and Nielsen conceived of the research topic, and Findley developed the research question. All five authors assisted in the final write-up.

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 to 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.

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