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The costs of favoritism: Is politically-driven aid less effective?

  • Axel Dreher

    (Georg-August University Göttingen)

  • Stephan Klasen

    (Georg-August University Göttingen)

  • James Raymond Vreeland

    (Georgetown University)

  • Eric Werker

    (Harvard Business School)

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 Courant Research Centre PEG in its series Courant Research Centre: Poverty, Equity and Growth - Discussion Papers with number 26.

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Date of creation: 11 Mar 2010
Date of revision:
Handle: RePEc:got:gotcrc:026
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  1. Kilby, Christopher, 1995. "World Bank Borrower Relations and Project Supervision," Vassar College Department of Economics Working Paper Series 32, Vassar College Department of Economics.
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  4. Christopher Kilby & Axel Dreher, 2009. "The Impact of Aid on Growth Revisited: Do Donor Motives Matter?," Villanova School of Business Department of Economics and Statistics Working Paper Series 5, Villanova School of Business Department of Economics and Statistics.
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  7. Berthelemy, Jean-Claude & Tichit, Ariane, 2002. "Bilateral Donors' Aid Allocation Decisions: A Three-dimensional Panel Analysis," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
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  11. Hristos Doucouliagos & Martin Paldam, 2009. "The Aid Effectiveness Literature: The Sad Results Of 40 Years Of Research," Journal of Economic Surveys, Wiley Blackwell, vol. 23(3), pages 433-461, 07.
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  19. repec:tpr:qjecon:v:114:y:1999:i:1:p:149-184 is not listed on IDEAS
  20. Dunning, Thad, 2004. "Conditioning the Effects of Aid: Cold War Politics, Donor Credibility, and Democracy in Africa," International Organization, Cambridge University Press, vol. 58(02), pages 409-423, April.
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  22. Voeten, Erik, 2005. "The Political Origins of the UN Security Council's Ability to Legitimize the Use of Force," International Organization, Cambridge University Press, vol. 59(03), pages 527-557, July.
  23. Axel Dreher & Jan-Egbert Sturm & James Raymond Vreeland, 2007. "Development Aid and International Politics: Does membership on the UN Security Council influence World Bank decisions?," KOF Working papers 07-171, KOF Swiss Economic Institute, ETH Zurich.
  24. Raghuram G. Rajan & Arvind Subramanian, 2005. "Aid and Growth: What Does the Cross-Country Evidence Really Show?," NBER Working Papers 11513, National Bureau of Economic Research, Inc.
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  26. Boone, Peter, 1996. "Politics and the effectiveness of foreign aid," European Economic Review, Elsevier, vol. 40(2), pages 289-329, February.
  27. Kilby, Christopher, 2000. "Supervision and performance: the case of World Bank projects," Journal of Development Economics, Elsevier, vol. 62(1), pages 233-259, June.
  28. Broz, J. Lawrence, 2002. "Political System Transparency and Monetary Commitment Regimes," International Organization, Cambridge University Press, vol. 56(04), pages 861-887, September.
  29. 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.
  30. 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.
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