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Aiding violence or peace? The impact of foreign aid on the risk of civil conflict in sub-Saharan Africa

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  • de Ree, Joppe
  • Nillesen, Eleonora

Abstract

This paper considers the impact of foreign aid flows on the risk of civil conflict. We improve on earlier studies on this topic by addressing the problem of the endogenous aid allocation using GDP levels of donor countries as instruments. A more structural addition to the literature is that we efficiently control for unobserved country specific effects in typical conflict onset and conflict continuation models by first differencing. The literature often overlooks the dynamic nature of these types of models, thereby forcing unlikely i.i.d. structures on the error terms implicitly.1 As a consequence, malfunctioning institutions, deep-rooted political grievances, or any other obvious, yet unobserved and time persistent determinants of war are simply assumed away. We find a statistically significant and economically important negative effect of foreign aid flows on the probability of ongoing civil conflicts to continue (the continuation probability), such that increasing aid flows tends to decrease civil conflict duration. We do not find a significant relationship between aid flows and the probability of civil conflicts to start (the onset probability).

Suggested Citation

  • de Ree, Joppe & Nillesen, Eleonora, 2009. "Aiding violence or peace? The impact of foreign aid on the risk of civil conflict in sub-Saharan Africa," Journal of Development Economics, Elsevier, vol. 88(2), pages 301-313, March.
  • Handle: RePEc:eee:deveco:v:88:y:2009:i:2:p:301-313
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    References listed on IDEAS

    as
    1. Collier, Paul & Hoeffler, Anke, 1998. "On Economic Causes of Civil War," Oxford Economic Papers, Oxford University Press, vol. 50(4), pages 563-573, October.
    2. repec:cup:apsrev:v:97:y:2003:i:01:p:75-90_00 is not listed on IDEAS
    3. Alesina, Alberto & Dollar, David, 2000. "Who Gives Foreign Aid to Whom and Why?," Journal of Economic Growth, Springer, vol. 5(1), pages 33-63, March.
    4. Paul Collier & Anke Hoeffler, 2004. "Greed and grievance in civil war," Oxford Economic Papers, Oxford University Press, vol. 56(4), pages 563-595, October.
    5. Alberto Alesina & Beatrice Weder, 2002. "Do Corrupt Governments Receive Less Foreign Aid?," American Economic Review, American Economic Association, vol. 92(4), pages 1126-1137, September.
    6. Tavares, Jose, 2003. "Does foreign aid corrupt?," Economics Letters, Elsevier, vol. 79(1), pages 99-106, April.
    7. Dean R. Hyslop, 1999. "State Dependence, Serial Correlation and Heterogeneity in Intertemporal Labor Force Participation of Married Women," Econometrica, Econometric Society, vol. 67(6), pages 1255-1294, November.
    8. Raghuram G. Rajan & Arvind Subramanian, 2008. "Aid and Growth: What Does the Cross-Country Evidence Really Show?," The Review of Economics and Statistics, MIT Press, vol. 90(4), pages 643-665, November.
    9. Collier, Paul & Dollar, David, 2002. "Aid allocation and poverty reduction," European Economic Review, Elsevier, vol. 46(8), pages 1475-1500, September.
    10. David Dollar & Craig Burnside, 2000. "Aid, Policies, and Growth," American Economic Review, American Economic Association, vol. 90(4), pages 847-868, September.
    11. William Easterly, 2003. "Can Foreign Aid Buy Growth?," Journal of Economic Perspectives, American Economic Association, vol. 17(3), pages 23-48, Summer.
    12. Carl-Johan Dalgaard & Henrik Hansen & Finn Tarp, 2004. "On The Empirics of Foreign Aid and Growth," Economic Journal, Royal Economic Society, vol. 114(496), pages 191-216, June.
    13. Edward Miguel & Shanker Satyanath & Ernest Sergenti, 2004. "Economic Shocks and Civil Conflict: An Instrumental Variables Approach," Journal of Political Economy, University of Chicago Press, vol. 112(4), pages 725-753, August.
    14. Paul Collier & Anke Hoeffler, 2007. "Unintended Consequences: Does Aid Promote Arms Races?," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 69(1), pages 1-27, February.
    15. Devarajan, Shantayanan & Rajkumar, Andrew Sunil & Swaroop, Vinaya, 1999. "What does aid to Africa finance?," Policy Research Working Paper Series 2092, The World Bank.
    16. Grossman, Herschel I, 1991. "A General Equilibrium Model of Insurrections," American Economic Review, American Economic Association, vol. 81(4), pages 912-921, September.
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    More about this item

    Keywords

    Civil conflict Foreign aid Sub-Saharan Africa;

    JEL classification:

    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • F35 - International Economics - - International Finance - - - Foreign Aid
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa

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