Essential Decisions: Donor Strategies for Managing Risks in Conflict Zones

• In Event: The Changing Landscape of Aid: Conflict, Natural Disasters and New Donors

Abstract

How do international donors adapt to high-risk environments? As fragile states have become the dominant target of foreign aid, this question is increasingly relevant for governments, international organizations and aid workers. We develop a novel theory of strategic adaptation to security risks by donor governments. We posit that conflict shocks increase risks for donors, but also improve donor ability to demand policy concessions from recipient countries. Whether expected gains—in terms of policy concessions made to donors—will outweigh the risks of aid delivery varies depending on the type of donor involved and the recipient country’s strategic importance. In the face of risk, donor governments are likely to increase bilateral aid in strategically important countries because the value of expected policy concessions outweighs the costs of operation. Conversely, they will decrease aid in non-strategic countries. Donor governments will generally reduce multilateral aid in response to shocks because international institutions typically produce policy concessions whose value does not outweigh the heightened costs of operations. We empirically test our theory by examining the effect of local violence on bilateral and multilateral aid projects in nine conflict-affected countries across Africa and Asia in the period from 1997–2014. We check the robustness of our analysis by examining donor behavior in response to clearly exogenous shocks—natural disasters. Overall, we find support for our theory, showing that bilateral donors are resilient to security risks in strategically important countries, yet respond highly risk-averse to conflict shocks in less strategic countries.

Authors

• Michael F. Harsch, New York University Abu Dhabi

• Sidak Yntiso, New York University