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World Bank Borrower Relations and Project Supervision

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This paper explores the relevance of the principal-agent model for analyzing development projects using data from World Bank-funded projects. After demonstrating that World Bank loan agreements can be viewed as principal-agent contracts, the paper explores the importance of the agency problem in determining project performance. Predictions from an adversarial model contrast with those of a cooperative model. The importance of information in the adversarial model links World Bank supervision to project performance. Data support the relevance of the agency problem and the role of supervision as monitoring. The paper concludes with suggestions for modifying project selection and implementation to reduce agency problems.

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File URL: http://irving.vassar.edu/VCEWP/VCEWP32.pdf
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Paper provided by Vassar College Department of Economics in its series Vassar College Department of Economics Working Paper Series with number 32.

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Date of creation: Mar 1995
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Publication status: Published in Canadian Journal of Development Studies, March 2001, 22(1):191-218.
Handle: RePEc:vas:papers:32

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Web page: http://irving.vassar.edu/VCEWP/VCEWP.htm
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  1. Singh, Nirvikar, 1985. "Monitoring and Hierarchies: The Marginal Value of Information in a Principal-Agent Model," Journal of Political Economy, University of Chicago Press, vol. 93(3), pages 599-609, June.
  2. Burnside, Craig & Dollar, David, 1997. "Aid, policies, and growth," Policy Research Working Paper Series 1777, The World Bank.
  3. Gauthier, B., 1990. "Agency Problems And Structural Arrangements Within International Economic Organizations: The Case Of The World Bank," Papers 143, Washington St. Louis - School of Business and Political Economy.
  4. Kilby, Christopher, 2000. "Supervision and performance: the case of World Bank projects," Journal of Development Economics, Elsevier, vol. 62(1), pages 233-259, June.
  5. Bijl, P.W.J. de, 1994. "Delegation of responsibility in organizations," Discussion Paper 1994-69, Tilburg University, Center for Economic Research.
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Cited by:
  1. Kilby, Christopher, 2000. "Supervision and performance: the case of World Bank projects," Journal of Development Economics, Elsevier, vol. 62(1), pages 233-259, June.
  2. Dreher, Axel & Klasen, Stephan & Raymond, James & Werker, Eric, 2010. "The costs of favoritism: Is politically-driven aid less effective?," Center for European, Governance and Economic Development Research Discussion Papers 97, University of Goettingen, Department of Economics.
  3. Axel Dreher & Stephan Klasen & James Raymond Vreeland & Eric Werker, 2013. "The Costs of Favoritism: Is Politically Driven Aid Less Effective?," Economic Development and Cultural Change, University of Chicago Press, vol. 62(1), pages 157 - 191.

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