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Abstract
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.
Dokumententyp: | Arbeitspapier |
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Name der Reihe: | Discussion Paper Series, University of Heidelberg, Department of Economics |
Band: | 0619 |
Ort der Veröffentlichung: | Heidelberg |
Erstellungsdatum: | 07 Okt. 2016 09:36 |
Erscheinungsjahr: | Oktober 2016 |
Seitenanzahl: | 42 |
Institute/Einrichtungen: | Fakultät für Wirtschafts- und Sozialwissenschaften > Alfred-Weber Institut |
DDC-Sachgruppe: | 330 Wirtschaft |
Freie Schlagwörter: | conflict, foreign aid, political economy, dynamic ordered panel data |
Schriftenreihe: | Discussion Paper Series / University of Heidelberg, Department of Economics |