Putting your money where your mouth is: geographic targeting of World Bank projects to the bottom 40 percent

The adoption of the shared prosperity goal by the World Bank in 2013 and Sustainable Development Goal 10, on inequality, by the United Nations in 2015 should strengthen the focus of development interventions and cooperation on the income growth of the bottom 40 percent of the income distribution (the bottom 40). However, little is known about within-country allocation patterns among the projects of development institutions. This paper proposes a new geographic targeting indicator and related methodology to assess the within-country aid allocations of donors by correlating the distribution of funding within countries with the geographical distribution of the bottom 40. Applying this methodology to World Bank funding for projects approved over 2005–14 shows that, of the 58 countries in the sample, 42 exhibit a positive correlation between the shares of the bottom 40 and World Bank funding, and, in almost half of these, the correlation is above 0.5. Slightly more than a quarter of the countries, mostly in Sub-Saharan Africa, exhibit a negative correlation. The presence of the bottom 40 is typically correlated with the population size of an administrative area. A regression analysis shows that, controlling for population, the correlation between the bottom 40 and World Bank funding switches sign and becomes significant and negative on average. This is entirely driven by Sub-Saharan Africa, because the correlation is insignificant in the rest of the world regions. Hence, the significant and positive correlation in the estimations without controlling for population suggests that World Bank project funding is concentrated in administrative areas in which more people live (including the bottom 40) rather than in poorer administrative areas.