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The Costs of Favoritism: Is Politically-Driven Aid Less Effective?

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  • Dreher, Axel

    () (Heidelberg University)

  • Klasen, Stephan

    () (University of Göttingen)

  • Vreeland, James Raymond

    () (Georgetown University)

  • Werker, Eric

    () (Harvard Business School)

Abstract

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.

Suggested Citation

  • Dreher, Axel & Klasen, Stephan & Vreeland, James Raymond & Werker, Eric, 2010. "The Costs of Favoritism: Is Politically-Driven Aid Less Effective?," IZA Discussion Papers 4820, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp4820
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    Cited by:

    1. Annen, Kurt & Strickland, Scott, 2017. "Global samaritans? Donor election cycles and the allocation of humanitarian aid," European Economic Review, Elsevier, pages 38-47.
    2. repec:dau:papers:123456789/14817 is not listed on IDEAS
    3. Denizer, Cevdet & Kaufmann, Daniel & Kraay, Aart, 2013. "Good countries or good projects? Macro and micro correlates of World Bank project performance," Journal of Development Economics, Elsevier, pages 288-302.
    4. Kilby, Christopher, 2013. "The political economy of project preparation: An empirical analysis of World Bank projects," Journal of Development Economics, Elsevier, pages 211-225.
    5. Kilby, Christopher, 2015. "Assessing the impact of World Bank preparation on project outcomes," Journal of Development Economics, Elsevier, pages 111-123.
    6. Axel Dreher & Vera Eichenauer & Kai Gehring, 2013. "Geopolitics, Aid and Growth," CESifo Working Paper Series 4299, CESifo Group Munich.
    7. repec:eee:wdevel:v:100:y:2017:i:c:p:16-30 is not listed on IDEAS
    8. Humphrey, Chris & Michaelowa, Katharina, 2013. "Shopping for Development: Multilateral Lending, Shareholder Composition and Borrower Preferences," World Development, Elsevier, vol. 44(C), pages 142-155.
    9. Ugo Panizza, 2013. "Guest Workers: Financial Development and Economic Growth: Known Knowns, Known Unknowns, and Unknown Unknowns," IHEID Working Papers 13-2013, Economics Section, The Graduate Institute of International Studies.
    10. Sivlai Marchesi & Emanuela Sirtori, 2010. "Is two better than one? Effects on growth of Bank-Fund interaction," Working Papers 189, University of Milano-Bicocca, Department of Economics, revised Jun 2010.
    11. Christopher Kilby, 2012. "Assessing the contribution of donor agencies to aid effectiveness: The impact of World Bank preparation on project outcomes," Villanova School of Business Department of Economics and Statistics Working Paper Series 20, Villanova School of Business Department of Economics and Statistics.
    12. James Vreeland, 2011. "Foreign aid and global governance: Buying Bretton Woods – the Swiss-bloc case," The Review of International Organizations, Springer, vol. 6(3), pages 369-391, September.
    13. Kersting, Erasmus K. & Kilby, Christopher, 2016. "With a little help from my friends: Global electioneering and World Bank lending," Journal of Development Economics, Elsevier, pages 153-165.
    14. Kersting, Erasmus K. & Kilby, Christopher, 2016. "With a little help from my friends: Global electioneering and World Bank lending," Journal of Development Economics, Elsevier, pages 153-165.
    15. Minasyan, Anna & Nunnenkamp, Peter & Richert, Katharina, 2017. "Does Aid Effectiveness Depend on the Quality of Donors?," World Development, Elsevier, vol. 100(C), pages 16-30.

    More about this item

    Keywords

    United Nations Security Council; political influence; aid effectiveness; World Bank;

    JEL classification:

    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • F35 - International Economics - - International Finance - - - Foreign Aid

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