DP4004 Foreign Aid Designed to Diminish Terrorist Atrocities can Increase Them

Author(s): Michael Mandler, Michael Spagat
Publication Date: August 2003
Keyword(s): civil conflict, foreign aid, human rights, paramilitaries, signalling, terrorist atrocities
JEL(s): D74, D82
Programme Areas: Public Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=4004

A domestic power faces an enemy and commits terrorist atrocities to increase the likelihood of victory. A foreign patron can grant aid to the power but prefers fewer or no atrocities. The domestic power responds by acquiescing in the creation of uncontrollable paramilitaries that commit even more atrocities. Once the paramilitaries are set up, aid flows and the atrocity level is high. Now suppose the foreign patron is uncertain whether the domestic power can control the paramilitaries. At a pooling equilibrium the home government will commit more atrocities than it would commit in isolation to demonstrate to the foreign patron that the paramilitaries are beyond the domestic power?s control. Case studies of Colombia, Northern Ireland, and the Middle East illustrate the models.