Association of World Bank Policy Lending with Social Development Policies and Institutions

21 Pages Posted: 1 Dec 2017

See all articles by Zeljko Bogetic

Zeljko Bogetic

World Bank

Lodewijk Smets

KU Leuven - Centre for Institutions and Economic Performance (LICOS); World Bank - Operations Evaluation Department (OED)

Date Written: November 28, 2017

Abstract

Do World Bank policy loans that are focused on social policy reform help improve social policies and institutions in borrower countries? To help answer this question, this paper provides new empirical evidence of the association between World Bank policy lending and measures of the quality of borrower countries'social policies and institutions that such lending supports. Results from estimating a two-stage least squares model indicate that the World Bank's policy lending has a significantly positive effect on the quality of social policies and institutions. The analysis also finds tentative evidence that loan conditions related to social protection and environmental sustainability are more effective in influencing social policies and institutions than those related to equity of public resource use and health and education. In general, the findings are confirmed when estimating a model with a lagged variable of interest. The results suggest that the right kind of conditionality can help improve social policies, therefore providing an important lever for reaching the twin goals of ending extreme poverty and stimulating shared prosperity.

Keywords: Inequality, Consumption, Fiscal & Monetary Policy, Finance and Development, Social Protections & Assistance, Financial Economics

Suggested Citation

Bogetic, Zeljko and Smets, Lodewijk, Association of World Bank Policy Lending with Social Development Policies and Institutions (November 28, 2017). World Bank Policy Research Working Paper No. 8263. Available at SSRN: https://ssrn.com/abstract=3079175

Zeljko Bogetic (Contact Author)

World Bank ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

Lodewijk Smets

KU Leuven - Centre for Institutions and Economic Performance (LICOS) ( email )

Waaistraat 6 - box 3511
Leuven, 3000
Belgium

World Bank - Operations Evaluation Department (OED) ( email )

United States

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