Update: A revised version of this paper has been published in Journal of Applied Econometrics.

All Publications
Working Paper

Fueling Conflict? (De)Escalation and Bilateral Aid

Date Published

Nov 2, 2016


Richard Bluhm, Martin Gassebner, Sarah Langlotz, Paul Schaudt



Bluhm, Richard, Martin Gassebner, Sarah Langlotz, Paul Schaudt. 2016. Fueling Conflict? (De)Escalation and Bilateral Aid. AidData Working Paper #31. Williamsburg, VA: AidData at William & Mary.


This paper studies the effects of bilateral foreign aid on conflict escalation and de-escalation. We make three major contributions. First, we combine data on civil wars with data on low level conflicts in a new ordinal measure capturing the two-sided and multifaceted nature of conflict. Second, we develop a novel empirical framework. 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 that are exogenous to recipients. We establish that the effect of foreign aid on the various transition probabilities is heterogeneous and can be substantial. Receiving bilateral aid raises the chances of escalating from small conflict to armed conflict, but we find no evidence that aid ignites conflict in truly peaceful countries.

Featured Authors

Richard Bluhm

Richard Bluhm

Assistant Professor at the Hannover Institute of Macroeconomics at Leibniz University

Related Datasets

No items found.

Related Blog Posts

No items found.

Related Events

No items found.