This thesis analyses several political economy mechanisms surrounding economic development and development cooperation. In Chapter 1, I show that foreign policy alignment changes following leader changes in both recipient and donor countries impact the allocation of Official Development Aid. In addition, I highlight that leader changes are a natural breaking point for bilateral relations that make usually inconsequential actions matter. In Chapter 2, I find that development aid affects civil conflict dynamics within recipient countries in previously unknown ways. Aid seems to have an escalating effect on civil conflict during episodes of minor violence, but no effect on civil conflict once violence is widespread. In Chapter 3, I analyze the effect of territorial decentralization and centralization on economic development in a global sample of primary subnational units. I show that the economic benefits of these reforms are very context-specific. Centralization reforms increase economic development in Africa, while decentralization reforms have been successful in Asia. Additionally, there are differential effects within treated areas. Centralization reforms are less beneficial for areas that move to the political periphery, while decentralization yields bigger economic payoffs in countries that have local accountability in the form of local elections. Chapter 4 turns the focus to OECD countries and analyses how international migration affects the probability of terrorism. Even though increases in the foreign-born population increase the risk of terrorism, the effect is indistinguishable from increases in the native-born population. What is more, restricting the rights of migrants does not diminish but increase the effect of migrants on terror. In summary, the thesis highlights that several political economy mechanisms in the context of development and political conflict are much more context and time dependent than previously thought.