World Bank Directives, Domestic Interests, and the Politics of Human Capital Investment in Latin America

Abstract

Recent studies underscore the importance of international organizations in transmitting norms, ideas, and values to developing countries. But has this diffusion influenced government policy in less developed countries? During the past two decades, the World Bank has emphasized the need for Third World governments to increase the stock of human capital by investing in education and health. Specifically, it has encouraged developing countries to shift an increasing share of their resources toward primary education. The authors examine 13 Latin American countries between 1980 and 1992 to establish the relationship between World Bank project lending and government investment in human capital. They combine time-series cross-sectional analysis with field research to evaluate the World Bank's influence on government spending on education and health. Although the World Bank may be successful in convincing developing country technocrats to “invest in people,” this research suggests that it is less successful in convincing the politicians who control the purse strings.