Aid and the Rise and Fall of Conflict in the Muslim World

New draft by Ahmed and Werker: The conflict following the Arab Spring is not the first wave of civil war in the Muslim world in recent time. From the mid-1980s to the end of the century, an average of one in ten predominantly-Muslim countries experienced violent civil war in any given year. We provide a partial explanation for this statistic: a foreign aid windfall to poor, non-oil producing Muslim countries during the twin oil crises of the 1970s allowed the recipient states to stave off rebellion. When oil prices fell in the mid-1980s, the windfall ended, and the recipient countries experienced a significant uptick in civil war. We test this hypothesis using a natural experiment of oil price changes which favored Muslim countries over non-Muslim countries. We then construct a formal model consistent with the stylized facts of this historical episode: oil-rich donors are generous according to the price of oil; and recipients are peaceful with no aid or high levels of aid, and otherwise experience civil war. The model generates further predictions which are consistent with the data.