The cancer of corruption and World Bank project performance: Is there a connection?

Abstract

Motivation: Corruption is often cited as a central reason why development projects fail. The article tests this claim by assessing whether World Bank projects perform worse in implementation environments with a higher corruption level. The article focuses specifically on bribery between public officials and firms during the procurement of needed goods and services. Approach and Methods: I use data from the World Bank’s Enterprise Surveys to avoid the often-criticized corruption perception indices and to allow for an assessment of effects at the subnational level. The analysis builds on an assessment of the performance ratings of 1,228 World Bank projects and covers 87 different countries. Finding: Overall, the article finds a small but statistically significant correlation between the corruption level and project performance. This result indicates that the corruption level of recipient countries should be considered during the design and implementation of projects. Policy Implications: Nonetheless, the relatively small correlation and the low pseudo R-squareds advise not overestimating the relevance of corruption for project performance. At least for the project level, the article finds no indication that corruption is a primary obstacle to aid effectiveness.