Does Foreign Aid Build Peace?

Does foreign aid build peace? The answer is of paramount importance for policy makers and practitioners, given that the world's poor are growing increasingly concentrated in conflict-affected countries. Scholars have also demonstrated keen interest, primarily examining the relationship between foreign aid and civil wars. This review takes stock of the existing literature through a survey of key theoretical arguments connecting aid to the onset, dynamics, and recurrence of civil wars. It then articulates a key challenge posed by undertheorization of aid allocation, which is largely nonrandom, making the causal effects difficult to infer. I identify five areas in need of greater attention: microfoundational theoretical assumptions about aid flows; aid in the context of other foreign policy options; explicit articulation of other factors that may mediate or moderate aid's effects; levels of observation and aggregation; and measurement.