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The political economy of multilateral lending to European regions


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.

Electronic supplementary material

The online version of this article (10.1007/s11558-020-09385-y) contains supplementary material, which is available to authorized users.

SUBMITTER: Asatryan Z 

PROVIDER: S-EPMC7330003 | biostudies-literature | 2020 Jul

REPOSITORIES: biostudies-literature

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