The effect of international development assistance (IDA) on conflict. A fuzzy regression discontinuity approach

In this paper we try to explore the relationship between the World Bank’s international development assistance (IDA) and domestic conflict. As IDA is distributed only to countries that fall below an (ad hoc) income threshold, we employ a (fuzzy) regression discontinuity approach to estimate the causal effect of IDA on conflict. Our results suggest that IDA leads to a decrease in minor conflict events, such as anti-government demonstrations and riots and in an increase in major conflict events like assassinations of political leaders and revolutions. Moreover, IDA is associated with an increase in coup attempts and autocratic regime transitions. These results suggest that foreign aid may “win the hearts and minds of the population”, by increasing popular support for the government, and at the same time increase conflict over lootable aid rents