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The Costs of Favoritism: Is Politically-driven Aid less Effective?

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  • Axel Dreher
  • Stephan Klasen
  • James Raymond Vreeland
  • Eric Werker

Abstract

As is now well documented, aid is given for both political as well as economic reasons. The conventional wisdom is that politically-motivated aid is less effective in promoting developmental objectives. We examine the ex-post performance ratings of World Bank projects and generally find that projects that are potentially politically motivated – such as those granted to governments holding a non-permanent seat on the United Nations Security Council or an Executive Directorship at the World Bank – are no more likely, on average, to get a negative quality rating than other projects. When aid is given to Security Council members with higher short-term debt, however, a negative quality rating is more likely. So we find evidence that World Bank project quality suffers as a consequence of political influence only when the recipient country is economically vulnerable in the first place.

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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 2993.

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Date of creation: 2010
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Handle: RePEc:ces:ceswps:_2993

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Keywords: World Bank; aid effectiveness; political influence; United Nations Security Council;

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References

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Citations

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Cited by:
  1. Christopher Kilby, 2011. "The Political Economy of Project Preparation: An Empirical Analysis of World Bank Projects," Villanova School of Business Department of Economics and Statistics Working Paper Series, Villanova School of Business Department of Economics and Statistics 14, Villanova School of Business Department of Economics and Statistics.
  2. James Vreeland, 2011. "Foreign aid and global governance: Buying Bretton Woods – the Swiss-bloc case," The Review of International Organizations, Springer, Springer, vol. 6(3), pages 369-391, September.
  3. Denizer, Cevdet & Kaufmann, Daniel & Kraay, Aart, 2013. "Good countries or good projects? Macro and micro correlates of World Bank project performance," Journal of Development Economics, Elsevier, Elsevier, vol. 105(C), pages 288-302.
  4. Humphrey, Chris & Michaelowa, Katharina, 2013. "Shopping for Development: Multilateral Lending, Shareholder Composition and Borrower Preferences," World Development, Elsevier, Elsevier, vol. 44(C), pages 142-155.
  5. Denizer, Cevdet & Kaufmann, Daniel & Kraay, Aart, 2011. "Good countries or good projects ? macro and micro correlates of World Bank project performance," Policy Research Working Paper Series 5646, The World Bank.
  6. Ugo Panizza, 2013. "Financial Development and Economic Growth: Known Knowns, Known Unknowns, and Unknown Unknowns," IHEID Working Papers, Economics Section, The Graduate Institute of International Studies 14-2013, Economics Section, The Graduate Institute of International Studies.
  7. Sivlai Marchesi & Emanuela Sirtori, 2010. "Is two better than one? Effects on growth of Bank-Fund interaction," Working Papers, University of Milano-Bicocca, Department of Economics 189, University of Milano-Bicocca, Department of Economics, revised Jun 2010.

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