A market-based mechanism to improve capital expenditures

Most governments in Sub-Saharan Africa have a capital spending problem. They don’t spend enough money to build or improve infrastructure that is in obviously short supply. What has emerged as a ‘second-best’ solution to this problem is infrastructure-directed lending by the development agencies. This is an unfortunate solution, not just for the weakness in state capacity that it perpetuates, and the fiscal space it frees up for countries to undertake expensive commercial borrowing, but also because it links unnecessary debt to necessary infrastructure. I propose a private sector-based solution that links infrastructure spending to contemporaneous revenues, in which the useful functions of the development agency are opened up to competition and the debt financing is replaced by markets for political risk. This solution could not only reduce the cost and debt burden of building infrastructure, but also create high-powered incentives that would solve the weaknesses in state capacity that made debt-linked infrastructure necessary in the first place

Corporate Misgovernance at the World Bank

We test for evidence of corporate misgovernance at the World Bank. Most major decisions at the World Bank are made by its Board of Executive Directors. However, in any given year the majority of the Bank's member countries do not get a chance to serve on this powerful body. In this paper, we empirically investigate whether board membership leads to higher funding from the World Bank's two main development financing institutions, the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA). We find that developing countries serving on the Board of Executive Directors can expect an approximate doubling of funding from the IBRD. In absolute terms, countries serving on the board are rewarded with an average $60 million "bonus" in IBRD loans. This is more likely driven by soft forces like boardroom culture rather than by the power of the vote itself. We find no significant effect in IDA funding.

The Political Economy of Bilateral Foreign Aid

Despite its developmental justification, aid is deeply political. This paper examines the political economy of aid allocation first from the perspective of the donor country, and then the political economy of aid receipt and implementation from the perspective of the recipient country. When helpful, it draws from studies of multilateral aid. Following those discussions, the paper explores solutions, employed by the development community, to the distortions brought about by the political economy of bilateral aid—distortions that steer aid away from achieving economic development in the recipient country. As it turns out, none of these solutions can shield foreign aid from the heavy hand of politics. Developing countries heavily influenced by foreign aid end up with a different, and novel, governing apparatus

Towards an Understanding of the Root Causes of Forced Migration: The Political Economy of "Natural" Disasters

Natural disasters occur in a political space. Although events beyond our control may trigger a disaster, the level of government preparedness and response greatly determines the extent of suffering incurred by the affected population. We use a political economy model of disaster prevention, supported by case studies, that explains why some governments prepare well for disasters and others do not. We also show how the presence of international aid distorts this choice and increases the chance that governments will under-invest. Policy suggestions that may alleviate this problem are discussed

The Costs of Favoritism: Is Politically-driven Aid less Effective?

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.World Bank, aid effectiveness, political influence, United Nations Security Council

Who Runs the International System? Power and the Staffing of the United Nations Secretariat

National governments frequently pull strings to get their citizens appointed to senior positions in international institutions. We examine, over a 60 year period, the nationalities of the most senior positions in the United Nations Secretariat, ostensibly the world's most representative international institution. The results indicate which nations are successful in this zero-sum game, and what national characteristics correlate with power in international institutions. The most overrepresented countries are small, rich democracies like the Nordic countries. Statistically, democracy, investment in diplomacy, and economic/military power are predictors of senior positions―even after controlling for the U.N. staffing mandate of competence and integrity. National control over the United Nations is remarkably sticky; however the influence of the United States has diminished as U.S. ideology has shifted away from its early allies. In spite of the decline in U.S. influence, the Secretariat remains pro-American relative to the world at large

The Costs of Favoritism: Is Politically-Driven Aid Less Effective?

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.World Bank, aid effectiveness, political influence, United Nations Security Council

Unobserved State Fragility and the Political Transfer Problem

Autocrats experiencing a windfall in unearned income may find it optimal to donate to other countries some of the windfall in order to make the state a less attractive prize to potential insurgents. We put forward a model that makes that prediction, as well as the additional predictions that the recipients of the aid may themselves become more repressive with high levels of aid and experience conflict with medium levels of aid. We call these joint phenomena the political transfer problem, and argue that the largest windfall of the 20th century, the period from 1973-85 during which oil prices were at all-time highs, produced long-run political dynamics consistent with the model. In particular, major oil exporters have been politically repressive, generous with foreign aid when oil prices are high, and free of civil war; in contrast, the recipients of petro aid were relatively repressive (and peaceful) during the period of high oil prices, but subject to civil war when oil prices fell and aid was reduced. Surprisingly, the political transfer problem did not seem to materialize when oil prices again began to creep up in the 21st century; this nonexistence of the problem can be explained by the model against the backdrop of evolving geopolitics and economics

Do Voters Demand Responsive Governments? Evidence from Indian Disaster Relief

Using rainfall, public relief, and election data from India, we examine how governments respond to adverse shocks and how voters react to these responses. The data show that voters punish the incumbent party for weather events beyond its control. However, fewer voters punish the ruling party when its government responds vigorously to the crisis, indicating that voters reward the government for responding to disasters. We also find evidence suggesting that voters only respond to rainfall and government relief efforts during the year immediately preceding the election. In accordance with these electoral incentives, governments appear to be more generous with disaster relief in election years. These results describe how failures in electoral accountability can lead to suboptimal policy outcomes

South Sudan: The Birth of an Economy

We discuss the birth of a new economy in a society that has only recently emerged from a 22-year-long civil war. The pace of growth so far has been fast but uneven. We find that aid and oil money are flowing rapidly into certain sectors, while other employment-generating areas of the economy, particularly agriculture, have barely changed their centuries-old ways. As a result, the recent windfall of wealth has yet to translate into tangible development benefits for the majority of the population. In order to achieve growth in these other sectors, there is a need for more innovation in both government policy and business strategy