Research Highlights Featured Chart

June 11, 2024

Policy interventions in conflict areas

Do cash transfer programs foster peace or fuel violence in unstable regions?

Tyler Smith

Young Somali men stand guard during a demonstration by a local militia.

Source: AMISOM Public Information

In recent years, cash or in-kind transfer programs have become a popular tool in developing countries to battle poverty. Many of these regions suffer from endemic armed conflict. Cash aid could have the additional benefit of fostering peace; it could just as easily fuel greater conflict.

In a paper in the American Economic Review: Insights, authors Patrick Premand and Dominic Rohner show that cash transfers in Niger did not reduce violence, at least in the short run. If anything, conflict appeared to increase in villages receiving benefits. 

The findings come from studying the impact of Niger’s national cash transfer program between 2012 and 2019. Villages were randomly selected through a lottery to receive monthly unconditional cash transfers for two years. During the program, Niger faced a worsening security situation in which Boko Haram and other jihadist groups increased their terrorist activities.

Figure 1 from the authors’ paper shows the effect of cash transfers on villages during and after the end of the program.

Figure 1 from Premand and Rohner (2024)

The x-axes indicate the two years that the program operated in treatment villages and the subsequent two years, divided by vertical dashed lines. The y-axes indicate measures of severe conflict near villages based on geolocated conflict data. The top and bottom panel represent estimates based on measuring exposure to a conflict event as being either the nearest neighboring village or within a 10km radius of the event, respectively. The vertical brackets represent 95 percent confidence intervals.

The chart shows that the impact of transfers became statistically significant in the second year of the program, after aid had been fully dispersed. But the effect dissipated once the program was completed. Overall, conflict was roughly 0.6 percentage points more likely in villages receiving cash transfers compared to their counterparts that didn’t receive benefits.

According to the authors, the results suggest that armed groups were trying to sabotage the program—which was widely seen as successful—and appropriate the transferred cash.

While the findings complicate the overall benefits of cash transfer programs in developing countries, the very large welfare gains from cash transfers make it unlikely that the conflict sparked by cash transfer programs fully negates the benefits.