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The political economy of multilateral lending to European regions

Zareh Asatryan and Annika Havlik

The Review of International Organizations, 2020, vol. 15, issue 3, No 6, 707-740

Abstract: 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.

Keywords: Political economy of international organizations; Regional favoritism; European Investment Bank; European Union (search for similar items in EconPapers)
JEL-codes: D72 F53 G2 (search for similar items in EconPapers)
Date: 2020
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Working Paper: The Political Economy of Multilateral Lending to European Regions (2019) Downloads
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DOI: 10.1007/s11558-020-09385-y

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