that a standard deviation increase in log income increases the predicted probability of graduation by about 4 percentage points.<sup>9</sup> The indicators for institutional development are both statistically significant and have the expected signs, in both samples. That is, higher institutional capacity and greater political freedoms both contribute positively to the likelihood of graduation. A standard-deviation increase in either index increases the predicted likelihood of graduating by about 2 percentage points. These results suggest that despite their conceptual overlap, these indicators each independently measure some aspects of institutional development that matter to decision makers.<sup>10</sup> Creditworthiness, as proxied by the Institutional Investor’s Credit Rating, also has a positive and (marginally) significant impact on predicted graduation in Sample 1. A standard-deviation increase (about 15 points on the 0-100 scale) is associated with an increase in the probability of graduating of about 1.3 percentage points. Creditworthiness has a positive but not significant coefficient in Sample 2.

Shocks represented by recent banking crises (specifically, a crisis occurring in the last 5 years) reduce the likelihood of graduating by about 1.2 (Sample 1) or 1.5 (Sample 2) percentage points on average. Similar variables were tested for debt crises and currency crises, but those were not significant predictors of graduating, and so for space reasons we did not include them in the tests reported in Table 3.

Smaller countries (those with under 1.5 million population) are significantly less likely to graduate than other nations, as hypothesized. The quantitative effect is about 1.3 percentage points.

Export concentration, contrary to our hypothesis, is positively and significantly related to graduation. An increase of about 0.18 on the 0-1 index increases the likelihood of being a graduate by about 1 percentage point. This result is counterintuitive, as lack of diversity in export composition makes a country more vulnerable to terms of trade or (depending on the commodity) climate-related shocks. A possible explanation for the result is that oil exporters are among the countries with highest concentration, and sentiment for lending to countries receiving large windfall revenues from natural resources may be relatively weak.<sup>11</sup> We tested several other proxies for vulnerability to shocks, including terms of trade shifts, exports as a share of GDP, and agricultural value added as a share of GDP. These were not significant predictors of graduation, and are not reported in the tables for space reasons.

9 Marginal effects in this section are calculated using the Stata dprobit command.

> 10 When we test each component of _Institutional Capacity_ separately, corruption turns out to be the strongest predictor of graduation, followed by rule of law, and then bureaucratic quality.  Of the two _Political Freedoms_ components, results for civil liberties are somewhat stronger than for political rights.  These results are available on request from the authors.

11 In 1975, the Bank decided to provide IBRD loans “only on an offset basis to oil producing countries in capital surplus”. It is unclear how long this policy lasted. Oil exporters were excluded from access to exceptional resources under the pilot Crisis Response Window in IDA15 (World Bank 2010).

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