Sectarian aid, sanctions and subnational development

Cemal Eren Arbatli () and David Gomtsyan

European Economic Review, 2021, vol. 139, issue C

Abstract: Hezbollah, a Shia Islamist political party and militant group based in Lebanon, is believed to receive a significant amount of informal funding from Iran. In this paper, we evaluate whether this funding has had any economically meaningful effect on subnational development in Lebanon. Since the amount of funding is not observed, we use Iranian oil rents and the intensity of sanctions against Iran as plausibly exogenous drivers of transfers to Hezbollah. Then, we leverage the well-established sectarian bias in Hezbollah’s spending to obtain conservative estimates of the direct effect of funding to Hezbollah. Studying the 1993–2010 period, we find a positive and economically significant relationship between Iranian oil windfalls and nighttime lights. This effect is significantly stronger in areas with greater concentration of Shia population. Also, nighttime lights are relatively lower in Shia areas than elsewhere during periods when sanctions against Iran intensified. These novel results attest to the non-negligible developmental effects of informal aid as well as how economic sanctions against donors might offset such effects.

Keywords: Foreign aid; Religious sectarianism; Aid effectiveness; Economic sanctions; Subnational development; Middle east (search for similar items in EconPapers)
JEL-codes: F35 F51 R11 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0014292121002063
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:139:y:2021:i:c:s0014292121002063

DOI: 10.1016/j.euroecorev.2021.103891

Access Statistics for this article

European Economic Review is currently edited by T.S. Eicher, A. Imrohoroglu, E. Leeper, J. Oechssler and M. Pesendorfer

More articles in European Economic Review from Elsevier
Bibliographic data for series maintained by Catherine Liu ().