Supervision and Performance: the Case of World Bank Projects.

This dissertation explores theoretical and empirical aspects of the relation between supervision and project performance. I focus on development projects funded by the World Bank and on supervision done by the World Bank. The World Bank is the preeminent international development organization both in terms of money lent and leadership; furthermore, data measuring project performance and supervision are relative comprehensive. The link between supervision and performance is of theoretical interest because it illuminates one side of World Bank-borrower interaction and of practical interest because supervision is an instrument controlled by the World Bank which may improve project performance. Chapter One compares an adversarial view of World Bank-borrower relations with a cooperative view. The adversarial view leads to a principal-agent model where a portion of implementation problems arise because World Bank information about borrower actions is incomplete. The importance of information links the monitoring component of World Bank supervision to project performance. In contrast, asymmetric information plays no role in the cooperative view; implementation problems are purely technical and hence the role of World Bank supervision is less clear. The chapter outlines the different empirical predictions of the two views and highlights policy implications for the design and supervision of development projects. Chapter Two is an empirical study of supervision and performance which addresses issues raised in Chapter One. Data are from 1426 World Bank-funded projects completed between 1981 and 1991. Analysis of the influence of World Bank supervision on project performance uses annual supervision and annual interim performance ratings. The annual updating process which generates the discrete interim ratings is described by an ordered probit likelihood function. Maximum likelihood estimates indicate a positive though small impact of supervision on performance. However, if there is a significant and persistent increase in the level of supervision, a gain of several percentage points in the economic rate of return is predicted. Supervision is more effective early in project implementation and in projects which smaller loans. The impact of supervision appears to be primarily due to the monitoring component rather than the assistance component; however, data limitations preclude a formal test.

Main Author: Kilby, Christopher.
Language: English
Published: 2000
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