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The political economy of conditionality: An empirical analysis of World Bank loan disbursements

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  • Kilby, Christopher

Abstract

Traditional aid conditionality has been attacked as ineffective in part because aid agencies - notably the World Bank - often fail to enforce conditions. This pattern undermines the credibility of conditionality, weakening incentives to implement policy reforms. The standard critique attributes this time inconsistency to bureaucratic factors within the aid agency such as pressure to lend, defensive lending, or short-sighted altruism. Pressure from powerful donors provides another potential explanation for lax enforcement. This paper presents an empirical analysis of the political economy of conditionality in international organizations using the case of the World Bank and the United States. The analysis examines panel data on World Bank disbursements to 97 countries receiving structural adjustment loans between 1984 and 2005. Using UN voting as an indicator of alignment with the U.S., the paper presents evidence that World Bank structural adjustment loan disbursements are less dependent on macroeconomic performance in countries aligned with the United States.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Development Economics.

Volume (Year): 89 (2009)
Issue (Month): 1 (May)
Pages: 51-61

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Handle: RePEc:eee:deveco:v:89:y:2009:i:1:p:51-61

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Web page: http://www.elsevier.com/locate/devec

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Keywords: World Bank Structural adjustment Conditionality United States;

References

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  1. Collier, Paul & Hoeffler, Anke, 2002. "Aid, policy, and growth in post-conflict societies," Policy Research Working Paper Series 2902, The World Bank.
  2. Martens,Bertin & Mummert,Uwe & Murrell,Peter & Seabright,Paul, 2002. "The Institutional Economics of Foreign Aid," Cambridge Books, Cambridge University Press, number 9780521808187.
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  14. Svensson, Jakob, 2003. "Why conditional aid does not work and what can be done about it?," Journal of Development Economics, Elsevier, vol. 70(2), pages 381-402, April.
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