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

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

Suggested Citation

  • Dreher, Axel & Klasen, Stephan & Raymond, James & Werker, Eric, 2010. "The costs of favoritism: Is politically-driven aid less effective?," University of Göttingen Working Papers in Economics 97, University of Goettingen, Department of Economics.
    • Handle: RePEc:zbw:cegedp:97
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    More about this item

    Keywords

    World Bank; Aid Effectiveness; Political Influence; United Nations Security Council;
    All these keywords.

    JEL classification:

    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • F35 - International Economics - - International Finance - - - Foreign Aid

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