DP20389 Foreign Aid and Targeted Political Violence
Elections in fragile democracies are not merely contests over policy but battles for control over state resources, including foreign aid. Aid provides local governments with substantial discretionary funds, creating strong incentives for rent-seeking political actors to capture political office. To win elections, political actors, both in government and opposition, try to reduce electoral competition through targeted political violence, especially in weakly institutionalized settings, where the economic stakes from gaining (or losing) office are higher and the potential costs of using targeted violence are limited. We empirically test this argument using novel geo-located data on aid disbursements from 18 European donors and the United States, covering the period from 1990 to 2020. Applying an instrumental variables (IV) approach, we find that foreign aid is associated with higher levels of targeted political violence against local authorities and politicians, in particular during elections and in contexts with weak institutions and strong informal politics. These findings highlight the unintended consequences of foreign aid, showing how it can lead to targeted political violence by increasing the stakes of political competition.
