World Bank Environmental Reform: Revisiting Lessons from Agency Theory

Abstract

Daniel Nielson and Michael Tierney’s article, “Delegation to International Organizations: Agency Theory and World Bank Environmental Reform” ~International Organization, Spring 2003!, makes a strong argument for ways in which principalagent ~P-A! models advance theoretical explanations of the behavior and performance of international organizations ~IOs!+ Most IOs suffer from widely recognized gaps between their mandates and their performance, gaps not well explained by the major theories in our field+ P-A models are premised on the assumption that performance problems naturally arise when one actor ~the principal! delegates to another actor ~the agent! the authority to act in the former’s interests+ The models seek to explain why and how the divergence of interests between the two parties may result in the agent’s actions differing from the principal’s intentions, how agents may be better controlled, and the costs of doing so+ The article is a straightforward application of the basic insights of the P-A model to the case of the World Bank’s environmental behavior+ The authors want to explain what they identify as sudden and significant environmental reform at the Bank in 1994, after previous Bank reforms fell short of altering its behavior+ The authors argue that the successful reform efforts reflect the convergence of preferences among the Bank’s major member state principals, and their use of a variety of screening, oversight, and contracting tools to reduce slippage between their interests and those of the Bank staff agents+ The authors test their model by examining the Bank’s environmental behavior from 1980–2000 and use descriptive statistics to assess Bank environmental lending behavior during the same period+ They conclude that a comparison of lending patterns in 1994–2000 with the 1987–93 period shows