Shocks, civil war and economic development in Sub-Saharan Africa

Foreign aid, low institutional quality and civil wars are associated with slow economic development in many Sub-Sahara African countries. I aim to identify causal relations and mechanisms that explain significant correlations. I use both macro- and micro-economic data and show that results are not necessarily far apart. I assess the influence of foreign aid using macro-level data of 30 Sub-Saharan African countries. Opponents argue that foreign aid corrupts, and will end up in the hands of a small elite. Institutional quality (e.g. corruption) will hence deteriorate, thereby adversely affecting economic growth. Even worse, the inflow of foreign exchange can presumably induce civil warfare or prolong existing wars. My outcomes suggest that aid reduces corruption the next year. Consistent with several accounts from small-scale development programs, impacts however disappear once donors reduce monitoring efforts. What about an alleged relation between foreign aid and civil war? Foreign aid does not influence the probability that a war will start but reduces the probability that ongoing wars continue the next year. The result on war start-ups speaks against the idea that aid motivates rebels that want to “grab” the money by getting into power. This cross-national (macro) result is consistent with micro-level results I find for rebellion in Burundi. Variation in appropriable export rents shows no robust relation with rebellion. Lower incomes however do promote rebellion; fighting may then suddenly become an attractive alternative to farming. The micro-level data from Burundi also allow examining people’s behaviour after warfare. Wars are destructive, but exposure to war violence appears to improve social relations within communities and promote investment in risky, more profitable, cash crops. These results could be interpreted as evidence of rapid (macro)-economic post-war recovery as recently observed in Sierra Leone, Rwanda, Mozambique and Angola. The dissertation challenges some conventional beliefs about key themes in development economics and policy. The results may help rethink researchers, policy-makers and donors about future paths to sound development.