Which Donors, Which Funds? The Choice of Multilateral Funds by Bilateral Donors at the World Bank
47 Pages Posted: 13 Jul 2014
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Which Donors, Which Funds? The Choice of Multilateral Funds by Bilateral Donors at the World Bank
Date Written: June 24, 2014
Abstract
The rapid growth of trust funds at multilateral development organizations has not received much attention in the academic literature. We consider the choice by sovereign donors among various types of multilaterally channeled funds. Taking the example of the World Bank, we distinguish between core funding through the International Development Association and trust funds, as well as different types of trust funds. Our argument builds on the premise that a donor trades off burden sharing in larger funds versus preference matching in smaller funds. Our model generates the prediction that trust funds are a result of larger incompatibility of donor preferences and IDA activities. In addition, if donors cannot agree based on their bilateral aid preferences, they should engage in smaller trust funds. Using a sample of World Bank trust funds which received contributions from OECD/DAC donors over the last decade, we corroborate our main hypotheses. Moreover, we show that donors rely on specific kinds of trust funds to alter IDA policies.
Keywords: Trust funds, multilateral funds, World Bank, aid allocation
JEL Classification: F35, F36, D70
Suggested Citation: Suggested Citation