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The Political Economy of Conditionality: An Empirical Analysis of World Bank Enforcement

Traditional aid conditionality has been attacked as ineffective in part because aid agencies--notably the World Bank--often fail to enforce conditions. This pattern undermines the credibility of conditionality, weakening incentives to implement policy reforms. The standard critique attributed this time inconsistency to bureaucratic factors within the aid agency such as pressure to lend, defensive lending, or short-sighted altruism. Pressure from powerful donors provides another potential explanation for lax enforcement. This paper presents and empirical analysis of the political economy of conditionality enforcement in international organizations using the case of the World Bank and the United States. The analysis examines panel data on World Bank disbursements to 97 countries receiving structural adjustment loans between 1984 and 2005. Using macroeconomic variables to measure compliance and UN voting as an indicator of alignment with the U.S., this paper presents evidence that the World Bank enforces structural adjustment conditions more vigorously in countries not aligned with the United States.

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Paper provided by Vassar College Department of Economics in its series Vassar College Department of Economics Working Paper Series with number 92.

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Handle: RePEc:vas:papers:92
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  1. Thomas Barnebeck Andersen & Henrik Hansen & Thomas Markussen, 2006. "US politics and World Bank IDA-lending," Journal of Development Studies, Taylor & Francis Journals, vol. 42(5), pages 772-794.
  2. Axel Dreher & Nathan Jensen, 2003. "Independent Actor or Agent? An Empirical Analysis of the impact of US interests on IMF Conditions," International Finance 0310004, EconWPA, revised 08 Jan 2004.
  3. Canavire-Bacarreza, Gustavo & Nunnenkamp, Peter & Thiele, Rainer & Triveño, Luis, 2006. "Assessing the allocation of aid : developmental concerns and the self-interest of donors," Open Access Publications from Kiel Institute for the World Economy 3983, Kiel Institute for the World Economy (IfW).
  4. Thomas Barnebeck Andersen & Thomas Harr & Finn Tarp, 2004. "On US politics and IMF Lending," Discussion Papers 04-11, University of Copenhagen. Department of Economics.
  5. Svensson, Jakob, 2000. "When is foreign aid policy credible? Aid dependence and conditionality," Journal of Development Economics, Elsevier, vol. 61(1), pages 61-84, February.
  6. Collier, Paul & Hoeffler, Anke, 2004. "Aid, policy and growth in post-conflict societies," European Economic Review, Elsevier, vol. 48(5), pages 1125-1145, October.
  7. Fleck, Robert K. & Kilby, Christopher & Fleck, Robert K., 2001. "World Bank Independence: A Model and Statistical Analysis of U.S. Influence," Vassar College Department of Economics Working Paper Series 53, Vassar College Department of Economics.
  8. Svensson, Jakob, 2003. "Why conditional aid does not work and what can be done about it?," Journal of Development Economics, Elsevier, vol. 70(2), pages 381-402, April.
  9. Axel Dreher, 2004. "A Public Choice Perspective of IMF and World Bank Lending and Conditionality," Public Choice, Springer, vol. 119(3_4), pages 445-464, 06.
  10. repec:cup:cbooks:9780521808187 is not listed on IDEAS
  11. Frey, Bruno S. & Schneider, Friedrich, 1986. "Competing models of international lending activity," Journal of Development Economics, Elsevier, vol. 20(2), pages 225-245, March.
  12. Mavrotas, George & Villanger, Espen, 2006. "Multilateral Aid Agencies and Strategic Donor Behaviour," Working Paper Series DP2006/02, World Institute for Development Economic Research (UNU-WIDER).
  13. Judson, Ruth A. & Owen, Ann L., 1999. "Estimating dynamic panel data models: a guide for macroeconomists," Economics Letters, Elsevier, vol. 65(1), pages 9-15, October.
  14. repec:cup:cbooks:9780521029018 is not listed on IDEAS
  15. Thomas Eisensee & David Strömberg, 2007. "News Droughts, News Floods, and U.S. Disaster Relief," The Quarterly Journal of Economics, MIT Press, vol. 122(2), pages 693-728, 05.
  16. Christopher Kilby, 2006. "Donor influence in multilateral development banks: The case of the Asian Development Bank," The Review of International Organizations, Springer, vol. 1(2), pages 173-195, June.
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