Optimism Bias and World Bank Project Performance

This paper examines the correlates of optimism bias and its impact on World Bank project performance. We measure in different ways using estimated Economic Rates Return (ERR) projects at approval closure. examine over 2,800 that were appraised between 1960 2019. find approximately 60% sample prone to bias. Correlates include both country characteristics. Findings also indicate incidence reduces chance a satisfactory performance rate time evaluation by 17–20%. Recommendations embracing complexity uncertainty considering for approval, providing organizational incentives ensuring are successful rather than ERRs being accurate, shifting some resources from appraisal implementation, changing nature supervision.