Fueling conflict?

(De)escalation and bilateral aid

authored by

Richard Bluhm, Martin Gassebner, Sarah Langlotz, Paul Schaudt

Abstract

This paper studies the effects of bilateral foreign aid on conflict escalation and deescalation. First, we develop a new ordinal measure capturing the two-sided and multifaceted nature of conflict. Second, we propose a dynamic ordered probit estimator that allows for unobserved heterogeneity and corrects for endogeneity. Third, we identify the causal effect of foreign aid on conflict by predicting bilateral aid flows based on electoral outcomes of donor countries which are exogenous to recipients. Receiving bilateral aid raises the chances of escalating from small conflict to armed conflict, but we find little evidence that aid ignites conflict in truly peaceful countries.

Organisation(s)

Institute of Macroeconomics

External Organisation(s)

University of California at San Diego
Munich Society for the Promotion of Economic Research - CESifo GmbH
ETH Zurich
University of Göttingen
University of St. Gallen (HSG)

Type

Article

Journal

Journal of applied econometrics

Volume

36

Pages

244-261

No. of pages

18

ISSN

0883-7252

Publication date

17.03.2021

Publication status

Published

Peer reviewed

Yes

ASJC Scopus subject areas

Social Sciences (miscellaneous), Economics and Econometrics

Sustainable Development Goals

SDG 16 - Peace, Justice and Strong Institutions

Electronic version(s)

https://doi.org/10.1002/jae.2797 (Access: Open)