Governance and Anti-Corruption Action Plans and Strategies: Secrets to Success in World Bank Investment Project Financing?

Abstract

Poor governance and corruption pose fundamental problems for development. International financial institutions and governments around the world accordingly expend significant portions of their resources and convening power on governance and anti-corruption efforts. Yet scholars and practitioners alike know little about the causal effects of any particular approach or tool to mitigate governance and corruption risks. This study examines the impact of the Governance and Anti-Corruption Action Plans (GAAPs) and governance/anti-corruption strategies in World Bank investment project financing. The World Bank uses these project-oriented tools to address governance and corruption risks in projects and, occasionally, at the sector or country levels. I argue that GAAPs and governance/anti-corruption strategies should cause better project outcomes given the adequacy of the tools, the World Bank’s institutional capacity for governance and anti-corruption (GAC) work, and recent international GAC efforts and trends. To test my argument and ascertain the extent of GAAP and governance/anti-corruption strategy incidence, I individually code the more than 3,000 appraisal documents for the World Bank investments projects approved from fiscal years 2001-2014. Then, I conduct an impact evaluation with a quasi-experimental design, using propensity score matching to control for selection bias. The results, though subject to some limitations, indicate that, on average, using a GAAP or governance/anti-corruption strategy causes project better project outcomes across all projects in the sample, ceteris paribus. As the first impact evaluation of a governance and anti-corruption tool applicable to a large and heterogeneous sample, the implications for theory and policy of this study abound. Notably, this study supports the conclusion that governance and anti-corruption efforts contribute significantly to the achievement of development outcomes.