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

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

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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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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