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Fueling Conflict? (De)Escalation and Bilateral Aid

Author

Listed:
  • Richard Bluhm

    (University of Hannover, Maastricht University, UNU-MERIT)

  • Martin Gassebner

    (University of Hannover, CESifo, KOF Swiss Economic Institute)

  • Sarah Langlotz

    (Heidelberg University)

  • Paul Schaudt

    (University of Hannover)

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 that are exogenous to the recipient’s conflict dynamics. 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.

Suggested Citation

  • Richard Bluhm & Martin Gassebner & Sarah Langlotz & Paul Schaudt, 2018. "Fueling Conflict? (De)Escalation and Bilateral Aid," HiCN Working Papers 265, Households in Conflict Network.
    • Handle: RePEc:hic:wpaper:265
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    5. Axel Dreher & Sarah Langlotz, 2020. "Aid and growth: New evidence using an excludable instrument," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 53(3), pages 1162-1198, August.
    6. Toke S. Aidt & Facundo Albornoz & Esther Hauk, 2021. "Foreign Influence and Domestic Policy," Journal of Economic Literature, American Economic Association, vol. 59(2), pages 426-487, June.
    7. Korn, Tobias, 2023. "The Persistent Consequences of Civil Conflict: Evidence from a New Measure for Subnational Conflict Exposure," Hannover Economic Papers (HEP) dp-711, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
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    18. Adam, Antonis & Tsarsitalidou, Sofia, 2022. "The effect of international development association's (IDA) aid on conflict. A fuzzy regression discontinuity approach," European Journal of Political Economy, Elsevier, vol. 74(C).
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    More about this item

    Keywords

    conflict; foreign aid; political economy; dynamic ordered panel data;
    All these keywords.

    JEL classification:

    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • F35 - International Economics - - International Finance - - - Foreign Aid
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities

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