External Subsidies and Lasting Peace

<jats:p> Third parties are thought to face a trade-off in that those actions most likely to bring peace in the short run appear least likely to ensure its long-run stability. Yet the trade-off between conflict management and conflict resolution may be overstated. Analyzing an iterated three-player bargaining model with both information and commitment problems, we first demonstrate two conditions under which third parties may produce lasting peace through conditional subsidies, even without addressing underlying informational or commitment problems. Second, we illustrate this possibility by analyzing the impact of US foreign aid on patterns of conflict and peace between Israel and her neighbors. Our analysis indicates that the termination of the rivalry between Israel and Egypt was most likely not brought about by the Camp David accords or peacekeeping operations, but by sustained foreign aid provision. We discuss the implications for both this conflict and conflict management more broadly. </jats:p>