World bank rules for aid allocation: New institutional economics or moral hazard?

Abstract

This chapter considers whether the World Bank has adequately justified its metric for distributing international aid to the poor. The International Development Association (IDA) is the part of the Bank that helps the world’s poorest countries, 1.5 billion of whom live on less than the equivalent of US$2 a day. In 2008, the IDA gave official development assistance worth 6689.24 million. It provides basic health services, primary education, clean water and sanitation, environmental protection, business support, infrastructure, and help with institutional reforms. This paper argues, however, that the Bank has failed to justify its claim that this metric gives enough weight to aiding the poor. Although it may turn out that some good justification is available, this paper suggests that there is ground for concern. This is an important conclusion for those who care about international economic justice. The World Bank is one of the largest aid donors and similar metrics guide many other development organizations’ aid efforts. Many countries, including the United Kingdom and Canada, also use similar metrics for distributing aid.