Moving Up the Ladder: An Analysis of IDA Graduation Policy

20 Pages Posted: 9 Apr 2020 Last revised: 10 Apr 2020

See all articles by Anton Dobronogov

Anton Dobronogov

World Bank

Stephen Knack

World Bank - Development Research Group (DECRG)

James Michael Wilson

affiliation not provided to SSRN

Date Written: April 8, 2020

Abstract

This paper analyzes the factors that affect countries' graduation from International Development Association (IDA) assistance and develops a statistical model of graduation. IDA provides concessional financing (credits, grants, and guarantees) to the world's poorest countries to help reduce poverty and improve living standards. IDA's eligibility criteria include (a) absence of International Bank for Reconstruction and Development (IBRD) creditworthiness and (b) gross national income (GNI) per capita below the IDA operational cutoff. Following several' reverse graduations' during the 1990s, the set of factors affecting graduation decisions broadened to include an assessment of the country's macroeconomic prospects, risk of debt distress, vulnerability to shocks, institutional constraints, and levels of poverty and social indicators. Through a pooled logit estimation using panel data covering IDA-eligible countries for 1987-2016, the authors determine the factors that influenced IDA graduation decision making for FY1989-FY2018. They find that throughout the sample the probability of being a graduate is positively and statistically significantly associated with income per capita, creditworthiness, and country size. They account for the shift of policy after 1998. Using an interaction dummy variable to capture the pre-FY1999 period, they find that life expectancy, reduced poverty, urbanization, and institutional development have been positive and significant predictors of graduation status in the later period.

Suggested Citation

Dobronogov, Anton and Knack, Stephen and Wilson, James Michael, Moving Up the Ladder: An Analysis of IDA Graduation Policy (April 8, 2020). World Bank Policy Research Working Paper No. 9208, Available at SSRN: https://ssrn.com/abstract=3571826

Anton Dobronogov (Contact Author)

World Bank ( email )

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HOME PAGE: http://www.worldbank.org

Stephen Knack

World Bank - Development Research Group (DECRG) ( email )

1818 H. Street, N.W.
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Washington, DC 20433
United States
202-458-9712 (Phone)

HOME PAGE: http://econ.worldbank.org/staff/sknack

James Michael Wilson

affiliation not provided to SSRN

No Address Available

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