Political Ideology, Quality at Entry and the Success of Economic Reform Programs

Smets, Lodewijk; Knack, Stephen; Molenaers, Nadia

Political Ideology, Quality at Entry and the Success of Economic Reform Programs

Autores

Smets, Lodewijk

Knack, Stephen

Molenaers, Nadia

Editor

World Bank, Washington, DC

Descripción

This study investigates how government ideology matters for the success of World Bank economic policy loans, which typically support market-liberalizing reforms. A simple model predicts that World Bank staff will invest more effort in designing an economic policy loan when faced with a left-wing government. Empirically, estimates from a Heckman selection model show that the quality at entry of an economic policy loan is significantly higher for governments with a left-wing party orientation. This result is robust to changes in the sample, alternative measures of ideology, different estimation techniques and the inclusion of additional control variables. Next, robust findings from estimating a recursive triangular system of equations indicate that leftist governments comply more fully with loan agreements. Results also suggest that World Bank resources are more productive -- in terms of reform success -- in the design of policy operations than in their supervision. Anecdotal evidence from several country cases is consistent with the finding that left-wing governments receive higher quality loans.

Palabras clave

ACCOUNTABILITY, ADJUSTMENT, AGRICULTURE, BALANCE OF PAYMENTS, BANK DEBT, BANK POLICY, BANK SUPERVISION, BORROWER, BORROWING, COMMITMENT, COMMITMENTS, COMPARATIVE ECONOMICS, CONDITIONALITY, CREDIBILITY, DEBT, DEBT REDUCTION, DECISION MAKING, DEMOCRACY, DEREGULATION, DEVELOPING COUNTRIES, DEVELOPMENT ASSISTANCE, DEVELOPMENT BANK, DEVELOPMENT BANKS, DEVELOPMENT ECONOMICS, DEVELOPMENT POLICY, DISBURSEMENTS, DISCOUNT RATE, ECONOMIC ADJUSTMENT, ECONOMIC DEVELOPMENT, ECONOMIC OUTCOMES, ECONOMIC PERFORMANCE, ECONOMIC POLICY, ECONOMIC REFORM, ECONOMIC SECTORS, ENDOGENOUS VARIABLES, EQUATIONS, FINANCIAL INSTITUTIONS, FINANCIAL SECTOR, FISCAL DEFICIT, FISCAL REFORM, FOREIGN AID, GDP, GDP PER CAPITA, GOVERNMENT CAPACITY, GOVERNMENT INTERVENTIONS, GOVERNMENT OFFICIALS, GOVERNMENT OWNERSHIP, GROWTH RATE, HUMAN DEVELOPMENT, IDA CREDITS, INCOME GROWTH, INCOME TAX, INFLATION, INFLATION RATE, INFORMATIONAL ASYMMETRIES, INTERNATIONAL BANK, INTERNATIONAL DEVELOPMENT, INTERNATIONAL ECONOMICS, INVESTIGATION, INVESTING, INVESTMENT PROJECTS, LEADERSHIP, LENDING DECISIONS, LENDING INSTRUMENT, LENDING VOLUME, LEVY, LOAN, LOAN AGREEMENT, LOAN AGREEMENTS, LOAN AMOUNT, LOAN COVENANTS, LOAN DISBURSEMENTS, LOAN QUALITY, LOAN SIZE, LOAN SUPERVISION, LOANS TO COUNTRIES, MACROECONOMIC CONDITIONS, MACROECONOMIC MANAGEMENT, MACROECONOMIC POLICY, MACROECONOMICS, MARKET REFORM, MARKET REFORMS, MARXISM, MAXIMUM LIKELIHOOD ESTIMATION, MINISTER, MOBILE PHONE, MONETARY POLICY, MONOPOLY, NATURAL DISASTERS, PERSONAL INCOME, POLITICAL ECONOMY, POLITICAL LEADERS, POSITIVE COEFFICIENT, PRIVATIZATION, PRODUCT MARKETS, PUBLIC SERVICES, REGIONAL DEVELOPMENT BANKS, REGIONAL DUMMIES, RETURNS, RULING PARTY, STRUCTURAL ADJUSTMENT, SUBVENTIONS, TAX, TAX REFORM, TAXATION, TELECOMMUNICATIONS, TRADE BARRIERS, TRADE POLICY, TRANCHE, TRANCHES, TRANSPORT, URBAN DEVELOPMENT, UTILITY FUNCTION, UTILITY MAXIMIZATION, VALUE ADDED, VOTERS, WORLD BANK LENDING, WORLD BANK LOAN