The Effects of Economic Growth on the Aid–Conflict Nexus

Abstract

Can foreign aid reduce violence in recipient countries? Empirical studies on the aid–conflict nexus have had mixed results. This paper argues that foreign aid can alleviate political violence in the recipient country, especially when it contributes to economic growth. To test this hypothesis, I collected data on aid-receiving countries in Asia from 1980 to 2010 and empirically examined the relationships among development aid, winning coalition size, economic growth, civil wars, and domestic terrorism using a moderated mediation model. I find that the impact of foreign aid on economic growth depends on the size of the winning coalition. Countries with larger winning coalitions tend to have faster economic growth. And consequently, these countries are less susceptible to civil wars and domestic terrorist attacks.