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Fueling conflict? (De)escalation and bilateral aid

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  • 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.

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  • Richard Bluhm & Martin Gassebner & Sarah Langlotz & Paul Schaudt, 2021. "Fueling conflict? (De)escalation and bilateral aid," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 36(2), pages 244-261, March.
    • Handle: RePEc:wly:japmet:v:36:y:2021:i:2:p:244-261
    DOI: 10.1002/jae.2797
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    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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    13. Bharati, Tushar & Jetter, Michael & Malik, Muhammad Nauman, 2024. "Types of communications technology and civil conflict," Journal of Development Economics, Elsevier, vol. 170(C).
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    17. Dreher, Axel & Lang, Valentin & Reinsberg, Bernhard, 2024. "Aid effectiveness and donor motives," World Development, Elsevier, vol. 176(C).
    18. Andreas Fuchs & Hannes Öhler, 2021. "Does private aid follow the flag? An empirical analysis of humanitarian assistance," The World Economy, Wiley Blackwell, vol. 44(3), pages 671-705, March.
    19. 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).
    20. Morakinyo O Adetutu & Kayode A Odusanya & Eleni Stathopoulou & Thomas G Weyman-Jones, 2023. "Environmental regulation, taxes, and activism," Oxford Economic Papers, Oxford University Press, vol. 75(2), pages 460-489.
    21. M. Christian Lehmann, 2020. "Aiding refugees, aiding peace?," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 22(5), pages 1687-1704, September.
    22. Adam, Antonis & Tsarsitalidou, Sofia, 2020. "The effect of international development assistance (IDA) on conflict. A fuzzy regression discontinuity approach," MPRA Paper 101841, University Library of Munich, Germany.
    23. Raphael J. Nawrotzki & Verena Gantner & Jana Balzer & Thomas Wencker & Sabine Brüntrup-Seidemann, 2022. "Strategic Allocation of Development Projects in Post-Conflict Regions: A Gender Perspective for Colombia," Sustainability, MDPI, vol. 14(4), pages 1-26, February.
    24. Koppenberg, Maximilian & Mishra, Ashok K. & Hirsch, Stefan, 2023. "Food Aid and Violent Conflict: A Review of Literature," IZA Discussion Papers 16574, Institute of Labor Economics (IZA).
    25. Gehring, Kai & Langlotz, Sarah & Kienberger, Stefan, 2018. "Stimulant or depressant? Resource-related income shocks and conflict," Working Papers 0652, University of Heidelberg, Department of Economics.

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    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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