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The political economy of multilateral lending to European regions #MMPMID38624440
Asatryan Z; Havlik A
ä-/-ä 2020[]; 15 (3): 707-40 PMID38624440show ga
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.Electronic supplementary material: The online version of this article (10.1007/s11558-020-09385-y) contains supplementary material, which is available to authorized users.