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

Authors
Publisher
Courant Research Centre Poverty, Equity and Growth Göttingen
Publication Date
Keywords
  • O19
  • O11
  • F35
  • Ddc:330
  • World Bank
  • Aid Effectiveness
  • Political Influence
  • United Nations Security Council
Disciplines
  • Economics
  • Political Science

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.

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