Holding the World Bank Accountable for its Research: The Case of NAFTA

The recent controversy that led to the resignation of World Bank President Paul D. Wolfowitz highlighted the lack of accountability at the World Bank. But it is not only its governance that suffers from the fact that the Bank, with 185 member nations, is ruled primarily by the U.S. Treasury Department.

Last year the World Bank established a panel of economists to evaluate its research from 1998-2005, including nearly 4000 papers, books, and reports. Among other problems, the panel had "substantial criticisms of the way that this research was used to proselytize on behalf of Bank policy, often without taking a balanced view of the evidence, and without expressing appropriate skepticism. Internal research that was favorable to Bank positions was given great prominence, and unfavorable research ignored."

But sometimes the problems are even worse, as when the Bank publishes erroneous research results, which influence important policy debates, and then refuses to correct its errors. CEPR has tried to hold the Bank accountable for its research.

In December of 2003, the World Bank released a paper which purported to show that NAFTA had a positive influence on Mexico's economic growth. The paper was timed -- and indeed, rushed -- to have an influence on the political debate. It was released on the final day of the CAFTA negotiations, and, since January 2004 was the tenth anniversary of NAFTA, to bring a spate of newspaper articles on the agreement's impact.

The World Bank's results, now shown to be erroneous, influenced the public debate. For example, it they was were cited by the Washington Post editorial board in December and a Washington Post column in January, in support of the newspaper's arguments for CAFTA.

The next month CEPR responded with a paper that highlighted errors in the paper that negated its results.

The papers and correspondence, between CEPR and the World Bank, explain the details of the Bank's errors and why they matter. The bottom line is that, because of uncorrected errors in the Bank's analysis, their econometric results cannot support the claim that NAFTA had a positive effect on Mexico's growth rate. As of today, May 24, 2007, the Bank has still not retracted its conclusion or corrected this mistake.

For a full timeline of the papers and correspondence, click here.