The political economy of multilateral lending to European regions
Date Published
Jul 2, 2020
Authors
Zareh Asatryan, Annika Havlik
Publisher
The Review of International Organizations
Citation
Asatryan, Z., & Havlik, A. (2020). The political economy of multilateral lending to European regions. The Review of International Organizations, 15(3), 707-740. https://doi.org/10.1007/s11558-020-09385-y
Note: A version of this article was previously published as an AidData Working Paper.
Abstract
We study the political economy of allocation decisions within a major state investment bank. Our focus is the European Investment Bank (EIB) – “The Bank of the EU” – which is the largest multilateral lending (and borrowing) institution in the world. We study the behavior of about 500 national representatives at the EIB’s Board of Directors – the bank’s decisive body for loan approvals – and show that a representative’s appointment increases the probability that the sub-national region where she works receives a loan by about 17 percentage points. This “home-bias” effect is driven by large loans financing infrastructure projects. We discuss several pieces of evidence, which are consistent with the hypothesis that this home-bias lending may be due to favoritism, however, we cannot conclusively demonstrate this case of resource misallocation.
