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

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

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 University of Goettingen, Department of Economics in its series Center for European, Governance and Economic Development Research Discussion Papers with number 97.

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Date of creation: 2010
Handle: RePEc:zbw:cegedp:97
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