Corporate Influence in World Bank Lending

Abstract

The World Bank withholds loan disbursements in order to build a reputation for enforcing conditionality, and multinational firms lobby for these funds to be released. Using data drawn from World Bank reports, we find evidence that (1) participation by Fortune 500 multinational corporations as project contractors and (2) investments by these firms are associated with disbursements that are unjustified by project performance. In addition, these measures of corporate interest are associated with inflated project evaluations. These effects are limited to multinational corporations headquartered in the United States or Japan, suggesting that the influence of private actors depends on access to particular national policy networks. In contrast to the evidence of corporate influence, we find no consistent evidence of geopolitical influences.

The political economy of International Finance Corporation lending

“…According to the AAAA, "[a]n important use of international public finance, including ODA, is to catalyse additional resource 11 We also investigate other determinants of IFC projects and find that these projects tend to go to countries that are richer and whose economies grow faster. 12 The two papers that are most closely related to ours are McLean (2017) and Malik and Stone (2017). McLean (2017) finds that recipients of World Bank aid preferentially allocate contracts to domestic companies and to companies from countries from whom they receive more bilateral aid.…”

“…In contrast to our paper, hers does not speak to the allocation decisions of the World Bank itself. Malik and Stone (2017) provide evidence that IDA and IBRD projects involving Fortune 500 companies receive larger disbursements and better evaluations relative to their performance, compared to other companies. The paper shows that this effect is limited to Fortune 500 companies based in the United States or Japan and, in contrast to our paper, does not provide evidence for an influence of other companies or countries.…”

“…The Board consists 18 The literature on international organizations pays less attention to the motives and lobbying activities of private companies compared to the direct interests of governments, though there is some evidence of lobbying. In addition to McLean (2017) and Malik and Stone (2017), which we introduced above, Broz and Hawes (2006) focus on banks and show that countries with larger exposure to U.S. banks are more likely to receive IMF programs and larger loans. They attribute this to the banks' influence over U.S. politicians and the politicians' power over the IMF.…”

What Influences World Bank Project Evaluations?

“…Evaluation bias or process changes are of particular concern to researchers if these are correlated with the researchers' key explanatory variables. A few researchers have devised clever ways to check for evaluation bias related to their particular question (Dreher et al 2013) but it is 1 Outsider papers includes Buntaine and Parks (2013), Dreher et al (2013), Girod and Tobin (2011), Kilby (2015), Malik and Stone (2016), Michaelowa and Borrmann (2006), Sud and Olmstead-Rumsey (2012), and Winters (2014). Insider papers include Blum (2014), Bulman et al (2015), Chauvet et al (2010), Chauvet et al (2015), Cruz and Keefer (2013), Deininger et al (1998), Denizer et al (2013), Dollar and Levin (2005), Dollar and Svensson (2000), Geli et al (2014), Guillaumont and Laajaj (2006), Isham and Kaufmann (1999), Isham et al (1997), Kaufmann and Wang (1995), Limodio (2011), Malesa and Silarszky (2005), Moll et al (2015), Pohl et al (1992), Ralston (2014) and Smets et al (2013).…”

Democracy and Aid Donorship

“…In reality, aid-for-policy deals also come in the form of private goods or club goods. For example, recent research suggests that aid benefits narrow economic interests of donor-country companies (Dreher and Richert 2017;Malik and Stone 2018).…”