Interactions Among Donors' Aid Allocations : Evidence from an Exogenous World Bank Income Threshold

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dc.creatorKnack, Stephen
dc.creatorXu, Lixin Colin
dc.creatorZou, Ben
dc.date2014-10-06T20:45:46Z
dc.date2014-10-06T20:45:46Z
dc.date2014-09
dc.date.accessioned2026-07-01T00:52:28Z
dc.descriptionThis 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.
dc.formatapplication/pdf
dc.formattext/plain
dc.identifierhttp://documents.worldbank.org/curated/en/2014/09/20222696/interactions-among-donors-aid-allocations-evidence-exogenous-world-bank-income-threshold
dc.identifierhttps://hdl.handle.net/10986/20377
dc.identifierhttps://doi.org/10.1596/1813-9450-7039
dc.identifier.urihttp://hdl.handle.net/123456789/412287
dc.languageEnglish
dc.languageen_US
dc.publisherWorld Bank Group, Washington, DC
dc.relationPolicy Research Working Paper;No. 7039
dc.rightsCC BY 3.0 IGO
dc.rightshttp://creativecommons.org/licenses/by/3.0/igo/
dc.subjectAID
dc.subjectAID AGENCIES
dc.subjectAID ALLOCATION
dc.subjectAID FLOWS
dc.subjectAID PROGRAMS
dc.subjectBANK LENDING
dc.subjectBILATERAL AID
dc.subjectCAPITAL MARKETS
dc.subjectDEBT
dc.subjectDECISION MAKING
dc.subjectDETERMINING ELIGIBILITY
dc.subjectDEVELOPMENT ASSISTANCE
dc.subjectDEVELOPMENT BANKS
dc.subjectDEVELOPMENT ECONOMICS
dc.subjectDEVELOPMENT ISSUES
dc.subjectDEVELOPMENT POLICY
dc.subjectDEVELOPMENT RESEARCH
dc.subjectDONOR AGENCIES
dc.subjectDONOR COORDINATION
dc.subjectECONOMETRICS
dc.subjectECONOMIC DEVELOPMENT
dc.subjectECONOMIC GROWTH
dc.subjectECONOMIC PERFORMANCE
dc.subjectECONOMIC SYSTEMS
dc.subjectECONOMIC THEORY
dc.subjectEQUATIONS
dc.subjectEXPORTS
dc.subjectFASHIONS
dc.subjectFREE RIDER
dc.subjectGDP
dc.subjectGROWTH PROJECTIONS
dc.subjectIDA
dc.subjectINCLUSION
dc.subjectINCOME
dc.subjectINCOME LEVELS
dc.subjectINFLATION
dc.subjectINTERNATIONAL AID
dc.subjectINTERNATIONAL DEVELOPMENT
dc.subjectINTERNATIONAL DEVELOPMENT ASSOCIATION
dc.subjectMIDDLE INCOME COUNTRIES
dc.subjectPER CAPITA INCOME
dc.subjectPOLITICAL ECONOMY
dc.subjectPOSITIVE EFFECTS
dc.subjectPUBLIC GOOD
dc.subjectSTRATEGIC COMPLEMENTARITY
dc.subjectTARGETING
dc.subjectWORLD DEVELOPMENT INDICATORS
dc.titleInteractions Among Donors' Aid Allocations : Evidence from an Exogenous World Bank Income Threshold

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