Foreign aid and insurrection

This paper analyses the allocative and distributive effects of foreign aid within a positive theory of insurrections. In this theory, foreign aid causes a reallocation of resources from production to an intensified struggle over distributive shares. Moreover, although the ruler of the recipient economy regards foreign aid as just another possible source of income for his parasitic clientele, the threat of insurrection induces a policy response that increases the income of the general population. The analysis shows how these allocative and distributive effects depend on the technology of insurrection.