Exogenous Shocks, Foreign Aid, and Civil War

Abstract

The recent civil war literature suggests that negative economic shocks in low-income countries increase the risk of civil war. Foreign aid can be an effective conflict-prevention tool in times of severe economic conditions. Aid cushions government spending from the downward pressures of economic shocks, providing recipient governments with resources they can use to make rebellion a less attractive option for aggrieved domestic groups. Using Official Development Assistance (ODA) data covering 1990 through 2004, we find that foreign aid appears to be a useful tool for preventing civil wars in the wake of negative economic shocks, and as such aid should be assessed by donors with these conflict-suppressing aspects in mind.

Aid and the Rise and Fall of Conflict in the Muslim World

“…Our main threshold of civil war involves non-internationalized internal war involving at least 1,000 battle deaths per year (although the findings are robust to using the lower threshold of 25 battle deaths). This threshold level of violence is consistent with two-sided conflicts involving a government and well-armed rebel groups and has been used accordingly in related studies (e.g., Kalyvas and Balcells, 2010;Savun and Tirone, 2012). The measure of the incidence of civil war is a binary variable equal to one if the relevant battle death threshold has been met, and zero otherwise.…”

“…Additionally, aid may mitigate conflict by providing a "cushion" to government spending from the downward pressures of negative economic shocks. Consequently, aid can provide governments with the resources necessary to make rebellion less attractive for opposition groups (Savun and Tirone, 2012).…”

Foreign Aid and Government Survival

“…They find that aid does not have a direct effect on the probability of civil war outbreaks, but through its effect on the growth rate and dependence on primary commodity exports, aid reduces the risk of domestic conflict. Aid can also succeed in mitigating the effect of negative economic shocks, thereby reducing the likelihood of a civil war onset (Savun and Tirone 2012). Nielsen et al (2011) extend this research by showing that conflict becomes more likely when there are severe and sudden drops in aid inflows such aid shocks generate a commitment problem between the government and rebel forces and, as a result, violent conflict breaks out.…”

The Hearts and Minds in Conflict and Peace

“…Its effectiveness, however, has been a subject of debate among scholars and policy makers alike. While some empirical studies have shown that aid is effective in deterring or ending violent conflicts (Bazzi and Blattman, 2014;Collier and Hoeffler, 2002a;de Ree and Nillesen, 2009;Savun and Tirone, 2012), some have found it ineffective or, in some cases, counterproductive (Crost, Felter, and Johnston, 2014;Dube and Naidu, 2015;Narang, 2014;Narang, 2015;Nunn and Qian, 2014;Sollenberg, 2012;Wood and Sullivan, 2015).…”

“…Focusing on aid withdrawal, Nielsen et al (2011) argue that aid withdrawal will weaken the military capacity of governments that have long been dependent on foreign assistance to buy peace from potential rebels. In another study, Savun and Tirone (2012) posit that aid can alleviate income shocks and hence prevents the occurrence of conflict by allowing recipient governments to distribute resources to potential rebels to pre-empt violent oppositions in times of severe economic downturns. In another study, theorize that development assistance from the US has improved the living conditions of Iraqis.…”