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Abstract

The success of development assistance is critical for various reasons including global and regional stability and the resolution of civil conflict. While international aid is recognized for its importance, scholars debate the effectiveness of aid efforts. This research extends and tests economic theories on the relationship between conflict and price shocks to labor-intensive and capital-intensive goods to see if these theories similarly apply to development aid. This is conducted through a quantitative analysis on official development assistance (ODA) in Afghanistan. Results indicate that the economic theories hold true for the application of aid. At a macro-level, aid towards labor-intensive sectors significantly decreased both conflict intensity and incidence. Although aid towards capital-intensive sectors only had a significant effect for conflict incidence six years after the aid was dispersed, aid towards-capital-intensive sectors still had a positive relationship with conflict. This indicates that future aid may want to focus on shoring up labor-intensive sectors as opposed to capital-intensive sectors.

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