Rethinking Development Aid for the XXIst Century: Foreign Aid and Conflicts

Main event: WIFO Research Seminar
Organised by: Austrian Institute of Economic Research
Language: Englisch
Österreichisches Institut für Wirtschaftsforschung
Arezki and his colleagues explore the changing relationship between armed conflicts and non-military foreign aid. They find that the sign of the relationship linking (bilateral) aid commitments to the onset of armed conflicts in aid recipient countries is statistically significant and goes from negative to positive after the year 2001. They also find that their results are driven by grants rather than loans and by aid for health and humanitarian purposes. The results are robust to a myriad of checks including substituting armed conflicts with terror attacks, accounting for debt relief initiatives and using different estimators. They interpret their results as stemming from a shift in donor preferences induced by 9/11 attacks toward supporting conflict affected countries, confirming the primacy of donors' interests over recipient needs.