Aid Shocks Likely Cause Armed Conflict

Research suggests that, even if aid proves entirely ineffective at relieving poverty or promoting economic growth, withdrawing it suddenly might lead to violent conflict.

September 15, 2010

Dan Nielson, Tara Candland

In 1990, Tuareg rebels launched a civil war against the Malian government that lasted six years and killed hundreds of people. Greed, grievances, ethnic tensions, climate stress, and government failure all contributed. But it turns out that foreign aid – or rather its sudden disappearance – provided the spark that set the tinder ablaze.

Tuareg nomads had become accustomed to receiving aid to offset drought and desertification in the 1970s and 1980s. But in 1989 the aid dried up quite suddenly, the government lost its ability to appease the Tuareg, and the rebels took up arms.

This pattern of violence following aid shortfalls seems to be a recurring pattern globally. In a forthcoming article to appear in the American Journal of Political Science, lead authors and AidData veterans Richard Nielsen (Harvard) and Michael Findley (BYU), along with Zachary Davis (BYU) and the two of us, found that severe decreases in foreign aid – what we call “aid shocks” – significantly heightened the probability of armed conflict in recipient countries.

Those familiar with the extant political science literature can take a look at the manuscript but for the rest of us, the logic is still relatively simple. Recipient governments at times divert significant shares of foreign aid – which in some countries exceeds all other sources of government revenue – to bolster military strength. Such strengthened armies ought to deter rebellion. In addition, recipient governments can use aid to make side payments to buy acquiescence from potential rebels. In either situation, when a sudden, unexpected aid shock occurs, the balance of power shifts in favor of the rebels, creating an opportunity for the rebels to strike.

But war is expensive both in monetary and human terms, and rarely do the benefits outweigh the high costs. What is more, both governments and rebels generally know this fact. So why not simply negotiate a new accord that favors the relatively strengthened rebels?

We argue that any such deal simply would not prove credible. Donors may renew foreign aid flows in the future, and the newly strengthened governments would then face strong incentives to renege on the old agreement. Foreseeing this, rebels should reject any deal from governments in the face of aid shocks and take the opportunity to strike while the government is relatively weak.

The evidence for this pattern is strong. Coupling AidData with the Uppsala conflict statistics, we paired the recipients that experienced aid shocks with nearly identical countries that did not. Using this “matching” method, we could treat the data much more as if it were the result of an experiment rather than simple statistical observation.

The results give us greater confidence that aid shocks actually cause armed conflict. And they also persuade us that donors are not merely reducing aid in anticipation of future violence.

We even find that the patterns hold when we set the threshold for aid shocks anywhere between the 10th and 25th percentiles. That is, when we define aid shocks as the most severe 10 percent of negative downturns in aid and below, and when we set it relatively high at the most negative 25 percent of shocks and below, we get statistically similar results.

The estimated effect of aid shocks with different percentile cut-offs used to define shocks

So how can we stop these aid shocks and possibly prevent violence? The implication is clear: foreign aid needs to be made more transparent and more consistent so that recipient governments can plan their expenditures, and donors should be more aware of the dangers of withdrawing aid suddenly, particularly in countries already prone to violent conflict. Much debate has raged over whether or not foreign aid is effective at achieving development results. But our research suggests that, even if aid proves entirely ineffective at relieving poverty or promoting economic growth, withdrawing it suddenly might lead to violent conflict.

The following post was written by Dan Nielson, an AidData PI at Brigham Young University, and Tara Candland, a BYU graduate now working as a consultant for Development Initiatives.