AID Effectiveness in Post-Conflict Countries

Since the end of the Cold War, post-conflict countries have attracted widespread economic assistance and policy advice from donor community to support their recoveries from war, to rebuild institutional capacities, and to restore their human and social capital. Yet, donor responses to post-conflict countries are uneven and some countries have received substantial amounts of assistance in the immediate aftermath of the conflict (e.g., Bosnia and Herzegovina, Kosovo, Afghanistan, and Iraq). In addition, the stark environment of the post-conflict countries poses challenges to both recipient and donor countries. This dissertation examines the role of aid in countries recovering from conflict by investigating the determinants and the time scale of post-conflict aid and its impact on outcomes of economic recovery. In so doing, this dissertation aims to enhance understanding of the role of foreign aid in post-conflict environments. It is timely in the context of reevaluation of aid effectiveness and increasing concerns about fragile states, whereby post-conflict countries are especially significant as they are less likely to meet MDGs; and yet, post-conflict countries attract aid from the same pool of donor funding, with other non-conflict countries. The analysis in this dissertation contributes to the ongoing debate on foreign aid effectiveness in three aspects. First, to trace temporal patterns of aid inflows and estimate their potential impact on recovery outcomes, I bring together both strands of aid literature: aid allocation and aid effectiveness. Second, under the same framework, I examine effectiveness issues through different recovery outcomes, such as economic growth, infant mortality, and good policy environment. Lastly, I combine cross-country and case study analysis. The findings of this analysis support the view that aid offsets negative effects of conflict on recipient societies. Although the effects of post-conflict aid on growth seem more ambiguous, in post-conflict settings, aid is more effective in saving lives, reconstructing physical and institutional infrastructure, and adopting good policies. These findings unravel the heterogeneous impact of post-conflict aid on different recovery outcomes and suggest the importance of generous aid flows during the early years after the conflict; better absorptive capacities of aid in later periods may not be attained if a country fails to build its institutions and reconstruct its social capital. Consequently, the time-sequencing of aid should be governed by multiple goals, if it is to attain an immediate peace dividend.