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Fueling conflict? (De)escalation and bilateral aid
Author(s) -
Bluhm Richard,
Gassebner Martin,
Langlotz Sarah,
Schaudt Paul
Publication year - 2021
Publication title -
journal of applied econometrics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.878
H-Index - 99
eISSN - 1099-1255
pISSN - 0883-7252
DOI - 10.1002/jae.2797
Subject(s) - endogeneity , de escalation , probit model , international conflict , armed conflict , probit , economics , ordered probit , development aid , econometrics , political science , economic growth , politics , law
Summary This paper studies the effects of bilateral foreign aid on conflict escalation and deescalation. First, we develop a new ordinal measure capturing the two‐sided and multifaceted nature of conflict. Second, 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 which are exogenous to recipients. Receiving bilateral aid raises the chances of escalating from small conflict to armed conflict, but we find little evidence that aid ignites conflict in truly peaceful countries.