A Spatial Analysis of The Effect of Foreign Aid in Conflict Areas

Although most aid projects are aimed at local development, research on aid and conflict mainly uses the country-year as unit of analysis. This study examines the link between aid and conflict at the sub-national level for three African countries between 1999-2008, using a unique dataset with information on local aid projects. The data shows that in general aid is allocated relatively close to the capital whereas conflicts occur in the peripheral areas. In contrast with the literature this study does not find a strong effect of aid on conflict as the analysis provides relatively little empirical support for a link in either positive or negative direction. Some of the results do show that non-fungible aid corresponds with decreases in conflict levels suggesting that aid increases the opportunity costs of rebellion although the magnitude of the effect is very low.