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Need, Merit, and Politics in Multilateral Aid Allocation: A District-Level Analysis of World Bank Projects in India

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  • Peter Nunnenkamp
  • Hannes Öhler
  • Maximiliano Sosa Andrés

Abstract

The targeting of foreign aid within recipient countries is largely unexplored territory. We help close this gap in empirical research on aid allocation by employing Poisson estimations on the determinants of the World Bank’s choice of project locations at the district level in India. The evidence of needs-based location choices is very weak, even though World Bank activities tend to concentrate in relatively remote districts. Spatial lags prove to be significant and positive pointing to regional clustering. Institutional conditions matter insofar as project locations cluster in districts belonging to states with greater openness to trade. We do not find any evidence that location choices are affected by political patronage at the state or district level. However, the World Bank prefers districts where foreign direct investors may benefit from projects related to infrastructure

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File URL: http://www.ifw-members.ifw-kiel.de/publications/need-merit-and-politics-in-multilateral-aid-allocation-a-district-level-analysis-of-world-bank-projects-in-india/KWP_1783.pdf
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Bibliographic Info

Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1783.

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Length: 34 pages
Date of creation: Jul 2012
Date of revision:
Handle: RePEc:kie:kieliw:1783

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Keywords: aid allocation; World Bank; Indian districts; political constituency;

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  1. Santos Silva, J.M.C. & Tenreyro, Silvana, 2011. "Further simulation evidence on the performance of the Poisson pseudo-maximum likelihood estimator," Economics Letters, Elsevier, vol. 112(2), pages 220-222, August.
  2. Rainer Thiele & Peter Nunnenkamp & Axel Dreher, 2007. "Do Donors Target Aid in Line with the Millennium Development Goals? A Sector Perspective of Aid Allocation," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 143(4), pages 596-630, December.
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  6. Alberto Alesina & Beatrice Weder, 2002. "Do Corrupt Governments Receive Less Foreign Aid?," American Economic Review, American Economic Association, vol. 92(4), pages 1126-1137, September.
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  11. Robert K. Fleck & Christopher Kilby, 2006. "World Bank Independence: A Model and Statistical Analysis of US Influence," Review of Development Economics, Wiley Blackwell, vol. 10(2), pages 224-240, 05.
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  13. Kilby, Christopher, 2009. "The political economy of conditionality: An empirical analysis of World Bank loan disbursements," Journal of Development Economics, Elsevier, vol. 89(1), pages 51-61, May.
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