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World Bank Borrower Relations and Project Supervision

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Abstract
This paper explores the relevance of the principal-agent model for analyzing development projects using data from World Bank-funded projects. After demonstrating that World Bank loan agreements can be viewed as principal-agent contracts, the paper explores the importance of the agency problem in determining project performance. Predictions from an adversarial model contrast with those of a cooperative model. The importance of information in the adversarial model links World Bank supervision to project performance. Data support the relevance of the agency problem and the role of supervision as monitoring. The paper concludes with suggestions for modifying project selection and implementation to reduce agency problems.

Suggested Citation

  • Kilby, Christopher, 1995. "World Bank Borrower Relations and Project Supervision," Vassar College Department of Economics Working Paper Series 32, Vassar College Department of Economics.
    • Handle: RePEc:vas:papers:32
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    File URL: http://irving.vassar.edu/VCEWP/VCEWP32.pdf
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    References listed on IDEAS

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    1. Singh, Nirvikar, 1985. "Monitoring and Hierarchies: The Marginal Value of Information in a Principal-Agent Model," Journal of Political Economy, University of Chicago Press, vol. 93(3), pages 599-609, June.
    2. Pohl, Gerhard & Mihaljek, Dubravko, 1992. "Project Evaluation and Uncertainty in Practice: A Statistical Analysis of Rate-of-Return Divergences of 1,015 World Bank Projects," The World Bank Economic Review, World Bank, vol. 6(2), pages 255-277, May.
    3. David Dollar & Craig Burnside, 2000. "Aid, Policies, and Growth," American Economic Review, American Economic Association, vol. 90(4), pages 847-868, September.
    4. de Bijl, P.W.J., 1994. "Delegation of responsibility in organizations," Discussion Paper 1994-69, Tilburg University, Center for Economic Research.
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    Cited by:

    1. Axel Dreher & Stephan Klasen & James Raymond Vreeland & Eric Werker, 2013. "The Costs of Favoritism: Is Politically Driven Aid Less Effective?," Economic Development and Cultural Change, University of Chicago Press, vol. 62(1), pages 157-191.
    2. Kilby, Christopher, 2000. "Supervision and performance: the case of World Bank projects," Journal of Development Economics, Elsevier, vol. 62(1), pages 233-259, June.
    3. repec:got:cegedp:97 is not listed on IDEAS

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