How Has Environment Mattered? An Analysis of World Bank Resource Allocation

50 Pages Posted: 20 Apr 2016

See all articles by Piet Buys

Piet Buys

World Bank - Development Research Group (DECRG)

Susmita Dasgupta

World Bank - Development Research Group (DECRG)

Anjali Acharya

World Bank

Ede Jorge Ijjasz Vasquez

World Bank

Kirk Hamilton

World Bank

Craig M. Meisner

The World Bank; The World Bank

Kiran Dev Pandey

World Bank

David Wheeler

World Bank - Policy Research Department

Date Written: April 8, 2004

Abstract

How has environment mattered for the World Bank? The aggregate figures suggest that it has mattered a great deal, since the Bank's total environmental lending has exceeded $US 9 billion over the past six years. In this paper the authors use newly available data to address a more precise version of the question: Across countries and themes, how well has the Bank's environmental lending and analytical and advisory activities (AAA) matched the incidence of environmental problems? For their assessment, the authors extend their previous work on local pollution and fragile lands (Buys and others 2003) to consideration of global emissions, biodiversity, water resources, and institutional development. They construct cross-country problem indicators for each environmental theme and combine them with country risk measures to estimate optimal thematic lending and AAA for each country. The authors then compare their estimates with actual lending and AAA to assess the match between environmental problems and the Bank's response.

The authors begin by constructing an overall indicator of environmental problems from their thematic indicators. Using regression analysis, they find a strong relationship between countries' general indicator values and the scale of their environmental borrowing, but a relatively weak relationship for AAA. At the thematic level, the authors find that problem indicators have relatively weak relationships with both lending and AAA. Adding country risk to the analysis, they test an optimal allocation model and find that it is consistent with the Bank's actual lending and AAA since 1998. The authors conclude that their model's assignment of lending and AAA to countries reflects the Bank's actual experience with partner countries. The model's explanatory power is relatively low, however, and when they compare model assignments to actual allocations, the authors find many large discrepancies for countries and environmental themes. Some gaps may reflect activity by other donor institutions, but many others may represent problems with efficient implementation of the Bank's Environment Strategy. To promote further discussion of this issue, the authors use their optimal allocation model to develop measures of lending opportunity by environmental theme for the Bank's partner countries.

This paper - a joint product of the Environment Department and Infrastructure and Environment, Development Research Group - is part of a larger effort to implement the world Bank's new environment strategy.

Suggested Citation

Buys, Piet and Dasgupta, Susmita and Acharya, Anjali and Ijjasz Vasquez, Ede Jorge and Hamilton, Kirk and Meisner, Craig M. and Pandey, Kiran and Wheeler, David, How Has Environment Mattered? An Analysis of World Bank Resource Allocation (April 8, 2004). World Bank Policy Research Working Paper No. 3269. Available at SSRN: https://ssrn.com/abstract=610310

Piet Buys

World Bank - Development Research Group (DECRG) ( email )

1818 H. Street, N.W.
MSN3-311
Washington, DC 20433
United States
202-522-3230 (Fax)

Susmita Dasgupta (Contact Author)

World Bank - Development Research Group (DECRG) ( email )

1818 H. Street, N.W.
MSN3-311
Washington, DC 20433
United States
202-473-2679 (Phone)
202-522-3230 (Fax)

HOME PAGE: http://econ.worldbank.org/staff/sdasgupta

Anjali Acharya

World Bank

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

Ede Jorge Ijjasz Vasquez

World Bank

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

Kirk Hamilton

World Bank ( email )

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

Craig M. Meisner

The World Bank ( email )

1818 H Street
Washington, DC 20433
United States

The World Bank ( email )

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

Kiran Pandey

World Bank ( email )

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

David Wheeler

World Bank - Policy Research Department ( email )

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

HOME PAGE: http://econ.worldbank.org/staff/dwheeler

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