Financing the Peace: Evaluating World Bank Post-Conflict Assistance Programs

Abstract

Has the World Bank's dramatic expansion of aid to countries devastated by civil conflict met its stated goals of speeding economic recovery and decreasing the probability of conflict recidivism? Our answer marries previous research into the politics of civil conflict with an understanding of the politics of the World Bank. The primary political economic challenge in post-conflict countries is securing credible commitments to the peace by former combatants. However, the Bank, needing to produce policy successes to justify continued funding, more likely aids countries where a credible commitment to the post-conflict peace already exists. Even if the Bank fails to assist post-conflict politicians form credible commitments to the peace, it may still speed recovery by providing financial resources and expertise, though these come at the cost of potentially aggravating post-conflict tensions. We test these arguments by estimating selection-corrected event history models of the effect of Bank programs on recovery and recurrence on an original data set of all World Bank programs in post-conflict environments. The results indicate that, when we control for non-random selection, the Bank has no systematic effect on either conflict recurrence or economic recovery, lending support to the argument that the Bank tends to select aid recipients according to their pre-existing probability of conflict recurrence.

Keywords: World Bank, Post-Conflict, Economic Recovery, Conflict Recurrence

JEL Classification: O19, O22, P48