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International Institutions and Political Liberalization: Evidence from the World Bank Loans Program

Abstract

How do international institutions affect political liberalization in member states? Motivated by an examination of the World Bank loans program, this article shows that institutions can incentivize liberalization by offering opportunities for countries to become associated with advanced, wealthy members. In the World Bank, when a loan recipient reaches a specified level of economic development, it becomes eligible to graduate from borrower status to lender status. Using a regression discontinuity design, the study demonstrates that this incentive motivates states to improve their domestic behavior with respect to human rights and democracy. Combining qualitative and quantitative evidence, the results suggest that the desire to become a member of this elite group is responsible for motivating member states to reform due to the belief that such membership brings diffuse international and domestic benefits.

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Department of Political Science, Columbia University (email: allison.carnegie@columbia.edu); Department of Politics, New York University (email: cds2083@nyu.edu). Authors are listed in alphabetical order. This version contains updates to the data over previous drafts. We thank Eric Arias, Raj Desai, Lindsay Dolan, Jeff Hammer, Susan Hyde, Joan Ricart-Huguet, Shanker Satyanath, Kenneth Scheve, Johannes Urpelainen, Matt Winters, the participants of seminars at Yale University, Cornell University and Princeton University, and the participants of the APSA Conference and the PEIO Conference for helpful comments. Special thanks to Peter Aronow for especially generous feedback. We also thank the World Bank Development Data Group for providing archival data. All remaining errors are our own. Data replication sets are available in Harvard Dataverse at: https://dx.doi.org/10.7910/DVN/ORDLXK and online appendices are available at https://doi.org/10.1017/S0007123417000187.

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