Economic Development and the World Bank

Abstract

We contribute to the research stream examining the effects of World Bank lending programs on economic growth in developing economies. We contend that it is important to distinguish between the short-term effects and extended exposure of countries to these lending programs and also to assess the Bank’s (late 1990s) reforms to improve the effectiveness of these programs in recipient countries to assess whether program lending has any positive impacts on economic growth. Our comparative cross-national findings using instrumental variables analysis to control for endogeneity between program participation and economic growth demonstrate that both the short-term and longer exposure to program lending worsens economic growth. We find no evidence that World Bank reforms improved economic growth rates in the post-reform (1999−2009) period. Our findings are robust to changes in model specifications and estimation techniques. Future research should examine whether these reforms had beneficial impacts in other societal areas affected by program lending.

Keywords

• World Bank
• international financial organizations
• program lending
• economic growth
• economic development