Skip to main content
Log in


Scholarship on informal politics in multilateral aid organizations investigates all stages of the allocation process - from project identification to aid disbursement and project evaluation. Yet, one area remains almost entirely overlooked in the literature - allocation of aid-financed contracts. This article aims to address the shortcoming of the existing research and develops a theory of contract allocation in a prominent multilateral aid organization – the World Bank. The theoretical argument explores the relationship between formal procurement arrangements and recipients’ control over contract allocation, and the role of this relationship in explaining patterns of contract allocation. My empirical analyses using data on the World Bank’s contracts provide evidence of recipients’ ability to allocate contracts in favor of domestic companies, as well as bilateral aid donors.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Fig. 1
Fig. 2
Fig. 3


  1. Regional development banks, for instance, rely on international competitive bidding. AfDB states that “An “Open Competitive Bidding (OCB)” process with wide and free bidding notification, and no restriction on participation of eligible bidders should normally be used” (AFDB 2015: 18). Asian Development Bank has a similar requirement: “Open competition is the basis for efficient public procurement… In most cases, international competitive bidding (ICB), properly administered, and with the allowance for preferences for domestically manufactured goods and, where appropriate, for domestic contractors for works under prescribed conditions is the most appropriate method” (ADB 2015: 2). The IADB and EBRD follow nearly identical procurement rules, which emphasize ICB as the main procurement method.

  2. The criteria for calculating the ICB threshold include foreign companies’ interest in a given market and the size of the market. See the World Bank’s Procurement Policies and Procedures for more detail (

  3. Detailed information on the World Bank’s policies regarding procurement of goods and services is available in the World Bank’s Standard Bidding Document for Procurement of Goods, and Standard Bidding Document for Procurement of Services (

  4. The database can be found at

  5. An alternative approach is to include all countries as potential bidders. However, a shortcoming of this approach is that it introduces a large number of “irrelevant” bidder countries, i.e., countries that did not indicate their interest in receiving a contract by submitting a bid, and hence their probability of winning a contract is zero.

  6. The appendix provides summary statistics and data sources for all variables.

  7. According to the World Bank’s procurement guidelines, “NCB may be the most appropriate method of procurement where foreign bidders are not expected to be interested because (a) of the size and value of the contract, (b) works are scattered geographically or spread over time, (c) works are labor intensive, or (d) the goods, works, and non-consulting services are available locally at prices below the international market. NCB procedures may also be used where the advantages of ICB are clearly outweighed by the administrative or financial burden involved” (World Bank 2014: 27–28).

  8. Standard International Trade Classification.

  9. The sectors are based on the SITC categories:

  10. The region of Africa, for instance, has five subregions: Eastern, Middle, Northern, Southern and Western Africa.

  11. There are alternative measures of corruption. One is Control of Corruption, which is part of the World Bank’s Worldwide Governance Indicators. This variable is coded to gauge “perceptions of the extent to which public power is exercised for private gain, including both petty and grand forms of corruption, as well as “capture” of the state by elites and private interests” (Kaufmann et al. 2011, 4). The range of this corruption measure is from −2.5 (most corrupt countries) to 2.5 (least corrupt countries). The World Bank’s and ICRG’s corruption variables are highly correlated – at .61 in the case of recipient countries, and at .83 in the case of bidding countries. Another alternative is Transparency International’s indicator, Corruption Perceptions Index. This measure reflects perceptions of public sector corruption on a scale of 0 (highly corrupt) to 100 (very clean). This measure is also highly correlated with the ICRG’s corruption index: at .49 in the case of recipient countries, and at .82 in the case of bidding countries.

  12. These models are available in the appendix.

  13. I thank an anonymous reviewer for pointing out the conditional effect.

  14. These results based on pooled contract data may be somewhat misleading if the US government chooses to exercise informal influence in some sectors, where powerful domestic interests exist, but not in others. To probe this possible sectoral variation in American informal influence, I replicate model 1 of Table 2 on contracts within 10 individual sectors. These results, reported in the appendix, show that US companies are less likely to win contracts in the following five categories: education; finance; health and social services; industry and trade; public administration and law. At the same time, there is no statistically significant relationship between the US dummy and contract award in three areas: agriculture; transport; and water, sanitation and flood protection. Finally, two sectors exhibit contract allocation patterns consistent with the expectation of informal influence in favor of US companies: i.e., energy and mining; and information and communication. The latter results reach statistical significance at conventional levels.

  15. Logit models of ICB choice are reported in the appendix.


  • African Development Bank. (2015). Procurement policy for Bank Group funded operations. Abidjan, Cote d’Ivoire.

    Google Scholar 

  • Asian Development Bank. (2015). Procurement Guidelines. Manila, Philippines.

  • Alesina, A., & Dollar, D. (2000). Who gives foreign aid to whom and why? Journal of Economic Growth, 5(1), 33–63.

    Article  Google Scholar 

  • Bailey, M. A., Strezhnev, A., & Voeten, E. (2017). Estimating Dynamic State Preferences from United Nations Voting Data. Journal of Conflict Resolution, 61(2), 430-456.

  • Balassa, B. (1965). Trade liberalization and ‘revealed’ comparative advantage. The Manchester School of Economics and Social Studies, 33(2), 99–123.

    Article  Google Scholar 

  • Bennett, D. Scott, and Allan Stam. (2000). EUGene: A Conceptual Manual. International Interactions 26:179–204. Website:

  • Branco, F. (1994). Favoring domestic firms in procurement contracts. Journal of International Economics, 37(1), 65–80.

    Article  Google Scholar 

  • Carter, D. B., & Stone, R. W. (2015). Democracy and multilateralism: the case of vote buying in the UN General Assembly. International Organization, 69(1), 1–33.

  • Copelovitch, M. (2010). Master or servant? Agency slack and the politics of IMF lending. International Studies Quarterly, 54(1), 49–77.

    Article  Google Scholar 

  • Dreher, A., Nunnenkamp, P., & Thiele, R. (2008). Does US aid buy UN General Assembly votes? A disaggregated analysis. Public Choice, 136(1), 139–164.

  • Dreher, A., Nunnenkamp, P., & Thiele, R. (2011). Are ‘new’ donors different? Comparing the allocation of bilateral aid between nonDAC and DAC donor countries. World Development, 39(11), 1950–1968.

    Article  Google Scholar 

  • Dreher, A., & Fuchs, A. (2015). Rogue aid? An empirical analysis of China's aid allocation. Canadian Journal of Economics, 48(3), 988–1023.

    Article  Google Scholar 

  • Faini, Riccardo and Enzo Grilli. (2004). Who Runs the IFIs? CEPR Working Paper No. 4666.

  • Kaufmann, D., Kraay, A., & Mastruzzi, M. (2011). The worldwide governance indicators: Methodology and analytical issues. Hague Journal on the Rule of Law, 3(2), 220–246.

    Article  Google Scholar 

  • Kilby, C. (2006). Donor influence in multilateral development banks: The case of the Asian Development Bank. Review of International Organizations, 1(2), 173–195.

    Article  Google Scholar 

  • Kilby, C. (2011). Informal influence in the Asian Development Bank. Review of International Organizations, 6(3–4), 223–257.

    Article  Google Scholar 

  • Kuziemko, I., & Werker, E. (2006). How much is a seat on the security council worth? Foreign aid and bribery at the United Nations. Journal of Political Economy, 114(5), 905–930.

    Article  Google Scholar 

  • Lasswell, H. (1936). Politics: Who gets what, when, how. New York: McGraw-Hill.

    Google Scholar 

  • Martin, S., Hartley, K., & Cox, A. (1999). Public procurement directives in the European Union: A study of local authority purchasing. Public Administration, 77(2), 387–406.

    Article  Google Scholar 

  • McLean, E. V. (2012). Donors' preferences and agent choice: Delegation of European development aid. International Studies Quarterly, 56(2), 381-395.

  • McLean, E. V. (2015). Multilateral aid and domestic economic interests. International Organization, 69(1), 97–130.

    Article  Google Scholar 

  • Michaelowa, K. (1997). Bestimmungsfaktoren liefergebundener Entwicklungshilfe - eine politökonomische Analyse (Factors Determining Tied Aid - A Public-Choice Approach). Zeitschrift für Wirtschafts- und Sozialwissenschaften, 4, 603–622.

    Google Scholar 

  • Milner, H. V. (2006). Why multilateralism? Foreign aid and domestic principal-agent problems. In D. G. Hawkins, D. A. Lake, D. L. Nielson, & M. J. Tierney (Eds.), Delegation and agency in international organizations (pp. 107–139). Cambridge: Cambridge University Press.

    Chapter  Google Scholar 

  • Miyagiwa, K. (1991). Oligopoly and discriminatory government procurement policy. The American Economic Review, 81, 1320–1328.

    Google Scholar 

  • Morrissey, O. (1993). The mixing of aid and trade policies. World Economy, 16(1), 69–84.

    Article  Google Scholar 

  • Neumayer, E. (2003a). Do human rights matter in bilateral aid allocation: A quantitative analysis of 21 donor countries. Social Science Quarterly, 84(3), 650–666.

    Article  Google Scholar 

  • Neumayer, E. (2003b). The determinants of aid allocation by regional multilateral development banks and United Nations agencies. International Studies Quarterly, 47(1), 101–122.

    Article  Google Scholar 

  • Nielson, D. L., & Tierney, M. J. (2003). Delegation to international organizations: Agency theory and World Bank environmental reform. International Organization, 57(2), 241–276.

    Article  Google Scholar 

  • Rickard, S. J., & Kono, D. Y. (2013). Think globally, buy locally: international agreements and government procurement. Review of International Organizations: 1–20.

  • Schneider, C. J., & Tobin, J. L. (2013). Interest coalitions and multilateral aid allocation in the European Union. International Studies Quarterly, 57(1), 103–114.

    Article  Google Scholar 

  • Schneider, C. J., & Tobin, J. L. (2016). Portfolio similarity and international development aid. International Studies Quarterly, 60(4), 647-664.

  • Schoultz, L. (1982). Politics, economics, and US participation in multilateral development banks. International Organization, 36, 537–574.

    Article  Google Scholar 

  • Stone, R. W. (2002). Lending credibility. Princeton: Princeton University Press.

    Book  Google Scholar 

  • Stone, R. W. (2004). The political economy of IMF lending in Africa. American Political Science Review, 98(4), 577–592.

    Article  Google Scholar 

  • Stone, R. W. (2008). The scope of IMF conditionality. International Organization, 62, 589–620.

    Article  Google Scholar 

  • Stone, R. W. (2011). Controlling institutions: International organizations and the global economy. Cambridge: Cambridge University Press.

    Book  Google Scholar 

  • Strange, A. M., Dreher A., Fuchs, A., Parks, B., & Tierney, M. J. (2015). Tracking under-reported financial flows: China’s development finance and the aid-conflict nexus revisited. Journal of Conflict Resolution. doi:10.1177/0022002715604363

  • Thacker, S. C. (1999). The high politics of IMF lending. World Politics, 52(1), 38–75.

    Article  Google Scholar 

  • Tierney, M. J., Nielson, D. L., Hawkins, D. G., Timmons Roberts, J., Findley, M. G., Powers, R. M., Parks, B., Wilson, S. E., & Hicks, R. L. (2011). More dollars than sense: Refining our knowledge of development finance using AidData. World Development, 39(11), 1891–1906.

    Article  Google Scholar 

  • Trionfetti, F. (2000). Discriminatory government procurement and international trade. The World Economy, 23(1), 57–76.

    Article  Google Scholar 

  • U.S. House. (2011). The impact of the World Bank and multilateral development banks on U.S. job creation. Subcommittee on International Monetary Policy and Trade of the Committee on Financial Services. 112th Cong., 1st sess., 27 July.

  • Vagstad, S. (1995). Promoting fair competition in public procurement. Journal of Public Economics, 58(2), 283–307.

    Article  Google Scholar 

  • Vreeland, J. R. (2011). Foreign aid and global governance: Buying Bretton woods – The Swiss-bloc case. Review of International Organizations, 6(3), 369–391.

  • World Bank. (2005). World Bank Group historical chronology. Washington, DC.

  • World Bank. (2011). Guidelines: Procurement of goods, works, and non-consulting services under IBRD loans and IDA credits & grants by World Bank borrowers. DC: Washington.

  • World Bank. (2014). Guidelines: Procurement of goods, works, and non-consulting services under IBRD loans and IDA Credits & Grants by World Bank borrowers. DC: Washington.

    Google Scholar 

  • Younas, J. (2008). Motivation for bilateral aid allocation: Altruism or trade benefits. European Journal of Political Economy, 24(3), 661–674.

    Article  Google Scholar 

  • Zhang, Christine, and Jeffrey Gutman. (2015). Aid procurement and the development of local industry: a question for Africa. Brookings Working Paper 88.

Download references

Author information

Authors and Affiliations


Corresponding author

Correspondence to Elena V. McLean.

Electronic supplementary material


(DTA 27425 kb)


(DO 2 kb)



Tables 4, 5, 6 and 7

Table 4 Descriptive statistics
Table 5 Logit models of choosing international competitive bidding as contract award method
Table 6 Models of contract allocation (with country fixed effects)
Table 7 Models of contract allocation (by sector)

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

McLean, E.V. The politics of contract allocation in the World Bank. Rev Int Organ 12, 255–279 (2017).

Download citation

  • Published:

  • Issue Date:

  • DOI:


JEL classifications