Splitting the check: explaining patterns of counterpart commitments in World Bank projects

The literature on the autonomy of international organizations describes how bureaucratic agents often operate with slack that allows them to pursue their preferences in the shadow of institutional mandates. We study the division of costs in World Bank projects between the Bank and its borrowers. If this is a realm in which World Bank bureaucrats exert agency, we expect to see counterpart financing vary with poverty and governance, in line with theories about aid selectivity. If, on the other hand, this is a realm in which the Bank’s state principals exert influence, we expect strategic interest measures to predict the division of financing. If counterpart commitments represent the outcome of Bank-borrower bargaining, we expect borrowers with outside options to contribute less. A 2004 rule revision at the Bank provides an opportunity to study how financing patterns changed when bureaucratic agents obtained more discretion. We show that increased flexibility within the Bank led to a deployment of resources that favored poorer countries, in line with the organizational mission of the Bank. We find less evidence of governance selectivity, and we find mixed results with regard to how a country’s strategic importance or bargaining power influenced levels of counterpart funding.