The Effects of Development Aid as Rents on Violence

Abstract

This study examines the extent to which development aid encourages or sup- presses violence, using the Nepalese Civil War (2000-2006) as a case study. The effect of aid is analyzed at an aggregate level, by sector, and by concentration levels using rich geo-coded data at the district level. Findings indicate that at the aggregated level, development aid has an insignificant effect on violence; while certain sectors and concentration levels of development aid significantly can encourage or reduce violence. Aid is regarded in the literature to act as a suppressor of conflict if it increases the opportunity cost to rebel and an encourager of conflict or as a rent which fuels rebel initiatives. This study indicates that development aid can effectively increase the opportunity cost to rebel, but can be seen as a rent or is perhaps poorly executed if aid is spent in the education or energy sector or is distributed at a low level of funding per capita.