Journal Article

Foreign Aid Shocks as a Cause of Violent Armed Conflict

Date Published

Apr 1, 2011

Authors

Richard A. Nielsen, Michael G. Findley, Zachary S. Davis, Tara Candland, Daniel L. Nielson

Publisher

Citation

Nielsen, R. A., Findley, M. G., Davis, Z. S., Candland, T., & Nielson, D. L. (2011). Foreign Aid Shocks as a Cause of Violent Armed Conflict. American Journal of Political Science, 55(2), 219-232. doi:10.1111/j.1540-5907.2010.00492.x

Journal Article

Foreign Aid Shocks as a Cause of Violent Armed Conflict

Date Published

Apr 1, 2011

Authors

Richard A. Nielsen, Michael G. Findley, Zachary S. Davis, Tara Candland, Daniel L. Nielson

Citation

Nielsen, R. A., Findley, M. G., Davis, Z. S., Candland, T., & Nielson, D. L. (2011). Foreign Aid Shocks as a Cause of Violent Armed Conflict. American Journal of Political Science, 55(2), 219-232. doi:10.1111/j.1540-5907.2010.00492.x

In this study we resolve part of the confusion over how foreign aid affects armed conflict. We argue that aid shocks – severe decreases in aid revenues – inadvertently shift the domestic balance of power and potentially induce violence. During aid shocks, potential rebels gain bargaining strength vis-a-vis the government. To appease the rebels, the government must promise future resource transfers, but the government has no incentive to continue its promised transfers if the aid shock proves to be temporary. With the government unable to credibly commit to future resource transfers, violence breaks out. Using AidData's comprehensive dataset of bilateral and multilateral aid from 1981 to 2005, we evaluate the effects of foreign aid on violent armed conflict. In addition to rare-event logit analysis, we employ matching methods to account for the possibility that aid donors anticipate conflict. The results show that negative aid shocks significantly increase the probability of armed conflict onset.

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