World Bank lending and regulation

Does World Bank lending promote deregulation with stronger incentives and critical resources or slow the process by blunting the impact of crises and indirectly promoting state control? This paper analyzes empirical links between aid flows and regulatory burden. Econometric estimates based on panel data for 83 aid receiving countries over 5 year periods from 1970 to 2000 find that World Bank lending, while not specifically targeting high or low regulatory states, is linked to lower subsequent regulation. This link holds for multilateral donors more broadly while bilateral donor funds apparently fail to influence the level of regulation.