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Institutionalized Insiders: Board Membership and Loan Commitments at the World Bank

Institutionalized Insiders: Board Membership and Loan Commitments at the World Bank. (joint with Ashwin Kaja) Eric Werker Harvard Business School International Political Economy Society November 14, 2008. Potential for Misgovernance.

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Institutionalized Insiders: Board Membership and Loan Commitments at the World Bank

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  1. Institutionalized Insiders:Board Membership and Loan Commitments at the World Bank (joint with Ashwin Kaja) Eric Werker Harvard Business School International Political Economy Society November 14, 2008

  2. Potential for Misgovernance • Executive Directors can use their position to direct loans and grants to their home country • We test for correlation between Board membership and World Bank commitments • Correlation may be driven by other factors, such as development needs • Good clients may be rewarded with, or seek out, a seat on the board • Paper will attempt to determine whether “pork barrel hypothesis” of abusing representative position, or some other factor, is driving correlation

  3. Empirical Specifications

  4. Alternate Specifications • Absolute Values: • $60M - $72M in additional aid • Statistically significant • Logit (Extensive margin) • Consistent sign, weaker p-values • Robustness Checks • Eliminate zero-service countries • Reset zeroes higher • Placebo Test • Group-year dummies • Restrict to high-rotation groups

  5. Who is Better at Capturing Gains?

  6. Two Surprising Results

  7. Design of International Institutions • Institutional power at the World Bank can reflect and accentuate national influence • Informal processes may mitigate • But can result in clubs of winners, rather than each country gaming the system for itself • Problem not present at IDA • The role of IO mission

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