Handbook on the Economics of Foreign Aid
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Handbook on the Economics of Foreign Aid

Edited by B. Mak Arvin and Byron Lew

It would be fair to say that foreign aid today is one of the most important factors in international relations and in the national economy of many countries – as well as one of the most researched fields in economics. Although much has been written on the subject of foreign aid, this book contributes by taking stock of knowledge in the field, with chapters summarizing long-standing debates as well as the latest advances. Several contributions provide new analytical insights or empirical evidence on different aspects of aid. As a whole, the book demonstrate how researchers have dealt with increasingly complex issues over time – both theoretical and empirical – on the allocation, impact, and efficacy of aid, with aid policies placed at the center of the discussion.
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Chapter 16: Informal influence on multilateral lending: the case of the Inter-American Development Bank

Elizabeth Bland and Christopher Kilby


In the aftermath of World War II, the World Bank was created to support post-war reconstruction. As the focus of the World Bank shifted to promoting economic development in low-and medium-income countries, regional development banks were founded to pursue similar goals. The Inter-American Development Bank (IDB) opened its doors in 1959, followed by the African Development Bank and Asian Development Bank (ADB) in 1964 and 1965, respectively. Although promoting economic growth and decreasing poverty are the stated goals of multilateral development banks (MDBs), the actions of these organizations do not solely reflect these goals; the interests of powerful member states sometimes intrude. Research on the governance and lending practices of the World Bank and the ADB has revealed how donors influence the process of project selection and implementation and thus compromise the autonomy of these institutions. Although it has been subjected to less public and academic scrutiny, the IDB presents an interesting case because of both its structural similarities and differences vis-a-vis the World Bank and the ADB. Because the regional development banks were modeled on the World Bank, the IDB, the ADB and the World Bank share the same basic voting system and financial structure. In addition, each has both a hard window (lending near market rates) and a soft window (with lending far below market rates). Finally, the IDB and the World Bank are located just blocks apart, a stone’s throw from the White House in Washington, DC.

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