Aiding Violence or Peace? The Impact of Foreign Aid on the Risk of Civil Conflict in Sub-Saharan Africa
This paper considers the impact of foreign aid on the risk of civil conflict. Previous studies on this topic have not properly addressed the problem of endogeneity between aid and conflict as well as the distorting influences of country specific time invariant effects. We propose GDP levels of donor countries as new and powerful instruments for foreign aid flows in the conflict regression. Aid flows are often defined as a fixed percentage of Donorâ€™s GDP hence they are strongly correlated. Changes in donor GDP constitute an exogenous shock to aid received by developing countries, in the sense that it is unrelated to the endogenous aid allocation process. Hence, the identification strategy does not pick up covariation due to aid rationing in the prelude to war. In addition, we condition on a number of macro factors to rule out other possible channels through which donor GDP affects conflict. We find a statistically significant and economically important negative effect of foreign aid on the risk of civil conflict. We estimate that a ten percent increase in foreign aid decreases the risk of civil conflict by six to nine percent using different specifications.
|Date of creation:||Dec 2006|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: +31 30 253 9800
Fax: +31 30 253 7373
Web page: http://www.uu.nl/EN/faculties/leg/organisation/schools/schoolofeconomicsuse/Pages/default.aspx
More information through EDIRC
|Order Information:|| Email: |
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Carl-Johan Dalgaard & Henrik Hansen & Finn Tarp, 2004.
"On The Empirics of Foreign Aid and Growth,"
Royal Economic Society, vol. 114(496), pages F191-F216, 06.
- Carl-Johan Dalgaard & Henrik Hansen & Finn Tarp, 2001. "On the Empirics of Foreign Aid and Growth," EPRU Working Paper Series 03-13, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics, revised Sep 2003.
- Dalgaard, Carl-Johan & Hansen, Henrik & Tarp, Finn, 2002. "On the Empirics of Foreign Aid and Growth," MPRA Paper 63696, University Library of Munich, Germany.
- Collier, Paul & Dollar, David, 2002.
"Aid allocation and poverty reduction,"
European Economic Review,
Elsevier, vol. 46(8), pages 1475-1500, September.
- Alberto Alesina & Beatrice Weder, 1999.
"Do Corrupt Governments Receive Less Foreign Aid?,"
NBER Working Papers
7108, National Bureau of Economic Research, Inc.
- Collier, Paul & Hoeffler, Anke, 2000.
"Greed and grievance in civil war,"
Policy Research Working Paper Series
2355, The World Bank.
- Alberto Alesina & David Dollar, 1998.
"Who Gives Foreign Aid to Whom and Why?,"
NBER Working Papers
6612, National Bureau of Economic Research, Inc.
- Tavares, Jose, 2003. "Does foreign aid corrupt?," Economics Letters, Elsevier, vol. 79(1), pages 99-106, April.
- Grossman, Herschel I, 1991. "A General Equilibrium Model of Insurrections," American Economic Review, American Economic Association, vol. 81(4), pages 912-21, September.
- 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.
- Raghuram G. Rajan, 2005. "Aid and Growth: What Does The Cross-Country Evidence Really Show?," Working Papers id:54, eSocialSciences.
- Raghuram G. Rajan & Arvind Subramanian, 2005. "Aid and Growth: What Does the Cross-Country Evidence Really Show?," NBER Working Papers 11513, National Bureau of Economic Research, Inc.
- Raghuram Rajan & Arvind Subramanian, 2005. "Aid and Growth; What Does the Cross-Country Evidence Really Show?," IMF Working Papers 05/127, International Monetary Fund.
- 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, 02.
- Collier, Paul & Hoeffler, Anke, 1998. "On Economic Causes of Civil War," Oxford Economic Papers, Oxford University Press, vol. 50(4), pages 563-73, October.
- Devarajan, Shantayanan & Rajkumar, Andrew Sunil & Swaroop, Vinaya, 1999. "What does aid to Africa finance?," Policy Research Working Paper Series 2092, The World Bank.
- David Dollar & Craig Burnside, 2000.
"Aid, Policies, and Growth,"
American Economic Review,
American Economic Association, vol. 90(4), pages 847-868, September.
- 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.
- 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.
- William Easterly, 2003. "Can Foreign Aid Buy Growth?," Journal of Economic Perspectives, American Economic Association, vol. 17(3), pages 23-48, Summer.
When requesting a correction, please mention this item's handle: RePEc:use:tkiwps:0609. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Marina Muilwijk)
If references are entirely missing, you can add them using this form.