Too Many Cooks in the Kitchen? The Division of Financing in World Bank Projects and Project Performance

Abstract

The total funding envelope for World Bank projects is often divided among various state and non-state actors, each of which can have competing ideas about or interests in the project. How does the division of financing relate to overall project effectiveness? I argue that too many funding streams in a project can reduce project effectiveness by creating delays, increasing transaction costs, and blurring lines of accountability. I combine original data on the number and concentration of financial collaborators in World Bank projects with the World Bank’s ratings of project performance, looking at within-country variation across projects to explore whether or not there is evidence of reduced aid effectiveness in projects with more participants. The results suggest that projects with significant cofinancing receive somewhat worse project ratings.

Keywords

• aid effectiveness
• cofinancing
• foreign aid
• World Bank