Redistribution of Economic Resources due to Conflict: The Maoist Uprising in Nepal

Nepal has seen a significant reduction in poverty over the period 1995{2010 which encompasses the decade-long Maoist-led civil war. So was the post-conflict provision of economic resources to districts related to their involvement in promoting the Maoist cause? We tackle this question combining theory and empirics. Our model predicts that poorer districts are more likely to support the Maoists and in return they get promised economic gains conditional on the Maoists prevailing post-conflict. Combining data on conflict with consumption expenditure data from the Nepal Living Standards Survey and data on foreign aid, we test these predictions. Our panel data estimates and our cross-sectional analysis consistently find strong support for our hypotheses. These are confirmed by the IV analysis that we perform at the panel level