TY  - BOOK
AU  - Knack,Stephen
AU  - Knack,Stephen
AU  - Xu,Lixin Colin
AU  - Zou,Ben
TI  - Interactions among Donors' Aid Allocations: Evidence from an Exogenous World Bank Income Threshold 
PY  - 2014///
CY  - Washington, D.C.
PB  - The World Bank
KW  - Aid Allocation
KW  - Aid Effectiveness
KW  - Bunching
KW  - Development Economics & Aid Effectiveness
KW  - Disability
KW  - Economic Theory & Research
KW  - Gender
KW  - Gender & Health
KW  - Herding
KW  - Macroeconomics and Economic Growth
KW  - Rural Development
KW  - Rural Microfinance & SME
KW  - Social Protections and Labor
N2  - This study investigates the effects of the World Bank's exogenously-determined income threshold for eligibility for concessionary International Development Association (IDA) loans on the allocations of bilateral donors. The donors might interpret the World Bank's policies and allocations across recipients as informative signals of where their own aid might be used most effectively. Alternatively, other donors might compensate for reduced IDA allocations by increasing their own aid. This paper shows that the signaling effect dominates any crowding out effects. The analysis uses panel data with country fixed effects and finds that aid from the bilateral donor countries is significantly reduced after countries cross the IDA income cutoff, controlling for other determinants of aid. Allocations by other donors are not sensitive to actual IDA disbursements, only to the IDA income threshold. Because crossing the income cutoff for eligibility significantly reduces aid levels from other donors as well as from the World Bank, government officials in recipient countries may have an incentive to manipulate their national accounts data to understate per capita income when it is near the IDA threshold. However, tests for "bunching" of observations just below the income threshold find no evidence to support data manipulation concerns. These findings suggest that graduation from IDA should be an even more gradual process than it already is, to dampen the sharp drops in aid experienced by countries after crossing an arbitrary income threshold
UR  - http://elibrary.worldbank.org/doi/book/10.1596/1813-9450-7039
ER  -