Interactions Among Donors' Aid Allocations : Evidence from an Exogenous World Bank Income Threshold
This study investigates the effects of the World Bank's exogenously-determined income threshold for eligibility for concessionary International Development Association (IDA) loans on the allocations of bilateral donors. The donors might interp...
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
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World Bank Group, Washington, DC
2014
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| Online Access: | http://documents.worldbank.org/curated/en/2014/09/20222696/interactions-among-donors-aid-allocations-evidence-exogenous-world-bank-income-threshold http://hdl.handle.net/10986/20377 |
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okr-10986-203772021-04-23T14:03:55Z Interactions Among Donors' Aid Allocations : Evidence from an Exogenous World Bank Income Threshold Knack, Stephen Xu, Lixin Colin Zou, Ben AID AID AGENCIES AID ALLOCATION AID FLOWS AID PROGRAMS BANK LENDING BILATERAL AID CAPITAL MARKETS DEBT DECISION MAKING DETERMINING ELIGIBILITY DEVELOPMENT ASSISTANCE DEVELOPMENT BANKS DEVELOPMENT ECONOMICS DEVELOPMENT ISSUES DEVELOPMENT POLICY DEVELOPMENT RESEARCH DONOR AGENCIES DONOR COORDINATION ECONOMETRICS ECONOMIC DEVELOPMENT ECONOMIC GROWTH ECONOMIC PERFORMANCE ECONOMIC SYSTEMS ECONOMIC THEORY EQUATIONS EXPORTS FASHIONS FREE RIDER GDP GROWTH PROJECTIONS IDA INCLUSION INCOME INCOME LEVELS INFLATION INTERNATIONAL AID INTERNATIONAL DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION MIDDLE INCOME COUNTRIES PER CAPITA INCOME POLITICAL ECONOMY POSITIVE EFFECTS PUBLIC GOOD STRATEGIC COMPLEMENTARITY TARGETING WORLD DEVELOPMENT INDICATORS This study investigates the effects of the World Bank's exogenously-determined income threshold for eligibility for concessionary International Development Association (IDA) loans on the allocations of bilateral donors. The donors might interpret the World Bank's policies and allocations across recipients as informative signals of where their own aid might be used most effectively. Alternatively, other donors might compensate for reduced IDA allocations by increasing their own aid. This paper shows that the signaling effect dominates any crowding out effects. The analysis uses panel data with country fixed effects and finds that aid from the bilateral donor countries is significantly reduced after countries cross the IDA income cutoff, controlling for other determinants of aid. Allocations by other donors are not sensitive to actual IDA disbursements, only to the IDA income threshold. Because crossing the income cutoff for eligibility significantly reduces aid levels from other donors as well as from the World Bank, government officials in recipient countries may have an incentive to manipulate their national accounts data to understate per capita income when it is near the IDA threshold. However, tests for "bunching" of observations just below the income threshold find no evidence to support data manipulation concerns. These findings suggest that graduation from IDA should be an even more gradual process than it already is, to dampen the sharp drops in aid experienced by countries after crossing an arbitrary income threshold. 2014-10-06T20:45:46Z 2014-10-06T20:45:46Z 2014-09 http://documents.worldbank.org/curated/en/2014/09/20222696/interactions-among-donors-aid-allocations-evidence-exogenous-world-bank-income-threshold http://hdl.handle.net/10986/20377 English en_US Policy Research Working Paper;No. 7039 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank Group, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research |
| repository_type |
Digital Repository |
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Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English en_US |
| topic |
AID AID AGENCIES AID ALLOCATION AID FLOWS AID PROGRAMS BANK LENDING BILATERAL AID CAPITAL MARKETS DEBT DECISION MAKING DETERMINING ELIGIBILITY DEVELOPMENT ASSISTANCE DEVELOPMENT BANKS DEVELOPMENT ECONOMICS DEVELOPMENT ISSUES DEVELOPMENT POLICY DEVELOPMENT RESEARCH DONOR AGENCIES DONOR COORDINATION ECONOMETRICS ECONOMIC DEVELOPMENT ECONOMIC GROWTH ECONOMIC PERFORMANCE ECONOMIC SYSTEMS ECONOMIC THEORY EQUATIONS EXPORTS FASHIONS FREE RIDER GDP GROWTH PROJECTIONS IDA INCLUSION INCOME INCOME LEVELS INFLATION INTERNATIONAL AID INTERNATIONAL DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION MIDDLE INCOME COUNTRIES PER CAPITA INCOME POLITICAL ECONOMY POSITIVE EFFECTS PUBLIC GOOD STRATEGIC COMPLEMENTARITY TARGETING WORLD DEVELOPMENT INDICATORS |
| spellingShingle |
AID AID AGENCIES AID ALLOCATION AID FLOWS AID PROGRAMS BANK LENDING BILATERAL AID CAPITAL MARKETS DEBT DECISION MAKING DETERMINING ELIGIBILITY DEVELOPMENT ASSISTANCE DEVELOPMENT BANKS DEVELOPMENT ECONOMICS DEVELOPMENT ISSUES DEVELOPMENT POLICY DEVELOPMENT RESEARCH DONOR AGENCIES DONOR COORDINATION ECONOMETRICS ECONOMIC DEVELOPMENT ECONOMIC GROWTH ECONOMIC PERFORMANCE ECONOMIC SYSTEMS ECONOMIC THEORY EQUATIONS EXPORTS FASHIONS FREE RIDER GDP GROWTH PROJECTIONS IDA INCLUSION INCOME INCOME LEVELS INFLATION INTERNATIONAL AID INTERNATIONAL DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION MIDDLE INCOME COUNTRIES PER CAPITA INCOME POLITICAL ECONOMY POSITIVE EFFECTS PUBLIC GOOD STRATEGIC COMPLEMENTARITY TARGETING WORLD DEVELOPMENT INDICATORS Knack, Stephen Xu, Lixin Colin Zou, Ben Interactions Among Donors' Aid Allocations : Evidence from an Exogenous World Bank Income Threshold |
| relation |
Policy Research Working Paper;No. 7039 |
| description |
This study investigates the effects of
the World Bank's exogenously-determined income
threshold for eligibility for concessionary International
Development Association (IDA) loans on the allocations of
bilateral donors. The donors might interpret the World
Bank's policies and allocations across recipients as
informative signals of where their own aid might be used
most effectively. Alternatively, other donors might
compensate for reduced IDA allocations by increasing their
own aid. This paper shows that the signaling effect
dominates any crowding out effects. The analysis uses panel
data with country fixed effects and finds that aid from the
bilateral donor countries is significantly reduced after
countries cross the IDA income cutoff, controlling for other
determinants of aid. Allocations by other donors are not
sensitive to actual IDA disbursements, only to the IDA
income threshold. Because crossing the income cutoff for
eligibility significantly reduces aid levels from other
donors as well as from the World Bank, government officials
in recipient countries may have an incentive to manipulate
their national accounts data to understate per capita income
when it is near the IDA threshold. However, tests for
"bunching" of observations just below the income
threshold find no evidence to support data manipulation
concerns. These findings suggest that graduation from IDA
should be an even more gradual process than it already is,
to dampen the sharp drops in aid experienced by countries
after crossing an arbitrary income threshold. |
| format |
Publications & Research :: Policy Research Working Paper |
| author |
Knack, Stephen Xu, Lixin Colin Zou, Ben |
| author_facet |
Knack, Stephen Xu, Lixin Colin Zou, Ben |
| author_sort |
Knack, Stephen |
| title |
Interactions Among Donors' Aid Allocations : Evidence from an Exogenous World Bank Income Threshold |
| title_short |
Interactions Among Donors' Aid Allocations : Evidence from an Exogenous World Bank Income Threshold |
| title_full |
Interactions Among Donors' Aid Allocations : Evidence from an Exogenous World Bank Income Threshold |
| title_fullStr |
Interactions Among Donors' Aid Allocations : Evidence from an Exogenous World Bank Income Threshold |
| title_full_unstemmed |
Interactions Among Donors' Aid Allocations : Evidence from an Exogenous World Bank Income Threshold |
| title_sort |
interactions among donors' aid allocations : evidence from an exogenous world bank income threshold |
| publisher |
World Bank Group, Washington, DC |
| publishDate |
2014 |
| url |
http://documents.worldbank.org/curated/en/2014/09/20222696/interactions-among-donors-aid-allocations-evidence-exogenous-world-bank-income-threshold http://hdl.handle.net/10986/20377 |
| _version_ |
1764445197596360704 |