Document Type

Working Paper

Journal/Book Title/Conference

Canadian Journal of Development Studies

Volume

22

Article

1065

Issue

1

Pages

191-218

Publication Date

9-14-2000

Department or Program

Economics Department

Abstract

This paper explores the relevance of the principal-agent model for analyzing development projects using data from World Bank-funded projects. After demonstrating that World Bank loan agreements can be viewed as principal-agent contracts, the paper explores the importance of the agency problem in determining project performance. Predictions from an adversarial model contrast with those of a cooperative model. The importance of information in the adversarial model links World Bank supervision to project performance. Data support the relevance of the agency problem and the role of supervision as monitoring. The paper concludes with suggestions for modifying project selection and implementation to reduce agency problems.

Share

COinS