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

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 10 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 become more repressive and 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. To provide a causal interpretation we leverage a quasi-natural experiment of oil price induced aid disbursements which favored Muslim countries over non-Muslim countries. Our empirical findings are consistent with existing theories that foreign aid can "buy" stability.