Bridging the Gap: Mobilization of Multilateral Development Banks in Infrastructure

The global infrastructure gap is estimated to be US $1-1.5 trillion in developing countries (United Nations, 2015). We explore how Multilateral Development Banks (MDBs) can help to fill this gap by mobilizing resources from other entities. The analysis focuses on more than 6,500 transactions in 2005-2020 to developing and emerging markets from the Infrastructure Journal database, the industry’s largest database of contracts. Thanks to the granular data, we can analyze the dynamics of flows from different actors to infrastructure at the country-subsector level (e.g., transports subsector in Mexico), and control for a wide range of fixed effects. MDB lending to a country/subsector increases significantly the inflows from other sources, up to 2 years after. Resources are mobilized from both the public and the private sector, and the mobilization that takes place is both cross-border and national. The effects exhibit country heterogeneity. Contemporaneously, indirect mobilization occurs in countries of all income levels though it is stronger in low and lower-middle income countries. As the time horizon increases, we find evidence of indirect mobilization only in low-income countries. Moreover, the more capital controls a country has, the more the MDB mobilization effects are undermined. Finally, when the global financial crisis of 2008 hit, no difference in mobilization effects was found, but during the COVID-19 pandemic mobilization effects were weakened, suggesting that there were not many resources to mobilize. The findings survive a long battery of robustness checks, and no evidence of anticipation effects is found.