Belfer Center, 29 Nov 10: Aid Under Fire: Development Projects and Civil Conflict
An increasing amount of development aid is targeted to areas affected by civil conflict; some of it in the hope that aid will reduce conflict by weakening popular support for insurgent movements. But if insurgents know that development projects will weaken their position, they have an incentive to derail them, which may exacerbate conflict. To formalize this intuition, we develop a theoretical model of bargaining and conflict in the context of development projects. The model predicts that development projects cause an increase in violent conflict if governments cannot (1) ensure the projectís success in the face of insurgent opposition and (2) credibly commit to honoring agreements reached before the start of the project. To test the model, we estimate the causal effect of a large development program on conflict casualties in the Philippines. Identification is based on a regression discontinuity design that exploits an arbitrary poverty threshold used to assign eligibility for the program. Consistent with the modelís predictions, we find that eligible municipalities suffered a substantial increase in casualties, which lasts only for the duration of the project and is split evenly between government troops and insurgents.