Thread by @valentin_lang

Why do large firms from rich countries – like Lidl or Mövenpick – receive @WorldBank loans for profitable investments?

In our new paper – now forthcoming at #JDE – we show that the Bank’s most powerful members help their firms get more loans (1/7)

sciencedirect.com/science/articl…

We use new data on more than 3,000 projects supported by the World Bank’s International Finance Corporation (@IFC_org).
Our analysis shows that firms get more loans when the government of their home country has a seat on the World Bank’s Board of Directors. (2/7)

Many IFC projects benefit both the recipient country and a sponsoring firm from a different country.
Our analysis suggests that countries form alliances when both countries have a Board seat to jointly attract IFC projects that benefit the private sector in both countries. (3/7)

Only 25 member countries have such a seat on the Board. Most of them are relatively rich countries. (4/7)

Hence, our finding helps to explain a pattern detected by @charlesjkenny , @jaredkalow , and @vijramachandran : The IFC doesn’t focus enough on low-income countries.

See their seminal analysis here: cgdev.org/publication/in… (5/7)

The pattern we find might also explain why the IFC funds projects where a positive impact on poverty reduction is not obvious. A particularly striking example is this one: (6/7)
foreignpolicy.com/2013/01/02/can…

In sum, relying on leveraging private financing for development is unlikely to circumvent the political interests of powerful countries involved in global development cooperation (/end)