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World Bank aid and local multidimensional poverty in Sub-Saharan Africa

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  • Zhang, Liyunpeng
  • Li, Xiao
  • Zhuang, Yuhang
  • Li, Ningning
Abstract
To what extent can World Bank (WB) aid reduce poverty to achieve the sustainable development goals? Recent literature suggests that the WB prefers to target affluent areas, prompting speculation about its ineffectiveness in poverty reduction. We contribute to the literature by examining whether WB aid alleviates poverty at the project level under the traditional motivations of aid flows. Combining geo-coded project data (2000–2014) with the individual multidimensional poverty index in 31 sub-Saharan African countries, we employ difference-in-differences and instrumental variable estimation strategies to address endogeneity. We demonstrate that WB aid significantly alleviated multidimensional poverty where projects were implemented by increasing public resources rather than economic activities, but only for the poor in more developed areas. The principal-agent problem and aid conditionality could weaken overall effectiveness. Our results suggest that enhancing multilateral cooperation can avoid the WB’s drawbacks in incentive structures and amplify its advantages in improving social welfare.

Suggested Citation

  • Zhang, Liyunpeng & Li, Xiao & Zhuang, Yuhang & Li, Ningning, 2022. "World Bank aid and local multidimensional poverty in Sub-Saharan Africa," Economic Modelling, Elsevier, vol. 117(C).
    • Handle: RePEc:eee:ecmode:v:117:y:2022:i:c:s0264999322003029
    DOI: 10.1016/j.econmod.2022.106065
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    More about this item

    Keywords

    World Bank aid; Multidimensional poverty; Sub-Saharan Africa; Urban bias; Principal-agent problem;
    All these keywords.

    JEL classification:

    • F35 - International Economics - - International Finance - - - Foreign Aid
    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty
    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa

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