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Supervision and performance: the case of World Bank projects

  • Kilby, Christopher

This paper explores empirical aspects of the relation between supervision and project performance. I focus on development projects funded by the World Bank and on supervision done by the World Bank. The World Bank is the preeminent international development organization both in terms of money lent and leadership; furthermore, data measuring project performance and supervision are relatively comprehensive. The link between supervision and performance is of theoretical interest because it illuminates one side of World Bank-borrower interaction and of practical interest because supervision is an instrument controlled by the World Bank which may improve project performance. Data are from 1426 World Bank-funded projects completed between 1981 and 1991. Analysis of the influence of World Bank supervision on project performance uses annual supervision and annual interim performance ratings. The annual updating process which generates the discrete interim ratings is described by an ordered probit likelihood function. Maximum likelihood estimates indicate a positive impact of early supervision on performance; late supervision has significantly less influence. The estimation predicts that a significant and persistent increase in the level of supervision may lead to a gain of several percentage points in the economic rate of return. Because of the size of World Bank-funded projects, the potential gains from increasing supervision far outweigh the costs.

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

Volume (Year): 62 (2000)
Issue (Month): 1 (June)
Pages: 233-259

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Handle: RePEc:eee:deveco:v:62:y:2000:i:1:p:233-259
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  1. Trumbull, William N & Wall, Howard J, 1994. "Estimating Aid-Allocation Criteria with Panel Data," Economic Journal, Royal Economic Society, vol. 104(425), pages 876-82, July.
  2. Katada, Saori N., 1997. "Two aid hegemons: Japanese-US interaction and aid allocation to Latin America and the Caribbean," World Development, Elsevier, vol. 25(6), pages 931-945, June.
  3. Jonathan Isham & Daniel Kaufmann, 1999. "The Forgotten Rationale For Policy Reform: The Productivity Of Investment Projects," The Quarterly Journal of Economics, MIT Press, vol. 114(1), pages 149-184, February.
  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. Pohl, Gerhard & Mihaljek, Dubravko, 1992. "Project Evaluation and Uncertainty in Practice: A Statistical Analysis of Rate-of-Return Divergences of 1,015 World Bank Projects," World Bank Economic Review, World Bank Group, vol. 6(2), pages 255-77, May.
  6. Kaufmann, Daniel & Wang, Yan, 1995. "Macroeconomic policies and project performance in the social sectors: A model of human capital production and evidence from LDCs," World Development, Elsevier, vol. 23(5), pages 751-765, May.
  7. Deininger, Klaus & Squire, Lyn & Basu, Swati, 1998. "Does Economic Analysis Improve the Quality of Foreign Assistance?," World Bank Economic Review, World Bank Group, vol. 12(3), pages 385-418, September.
  8. Gourieroux, Christian & Monfort, Alain & Renault, Eric & Trognon, Alain, 1987. "Simulated residuals," Journal of Econometrics, Elsevier, vol. 34(1-2), pages 201-252.
  9. Dewald, Michael & Weder, Rolf, 1996. "Comparative advantage and bilateral foreign aid policy," World Development, Elsevier, vol. 24(3), pages 549-556, March.
  10. G. S. Maddala, 1987. "Limited Dependent Variable Models Using Panel Data," Journal of Human Resources, University of Wisconsin Press, vol. 22(3), pages 307-338.
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