Which Donors, Which Funds? The Choice of Multilateral Funds by Bilateral Donors at the World Bank

38 Pages Posted: 20 Apr 2016

See all articles by Bernhard Reinsberg

Bernhard Reinsberg

University of Cambridge; University of Glasgow - School of Social and Political Sciences

Katharina Michaelowa

University of Zurich - Centre for Comparative and International Studies (CIS)

Stephen Knack

World Bank - Development Research Group (DECRG)

Multiple version iconThere are 2 versions of this paper

Date Written: October 14, 2015

Abstract

The rapid growth of trust funds at multilateral development organizations has been widely neglected in the academic literature so far. Using a simple illustrative model, this paper examines the choice by sovereign donors among various trust fund options. The authors contend that the choice among the different trust funds involves a fundamental trade-off: larger funds provide donors with the benefit of burden sharing. Conversely, each donor can better assert its individual preferences in a fund with fewer other donors. The theoretical considerations yield testable implications on a range of factors affecting this fundamental tradeoff, most notably the area of intervention of the trust fund and competing domestic interests of donor countries. Using a sample of World Bank trust funds, the paper examines the participation decisions of Organisation for Economic Co-operation and Development/Development Assistance Committee donors over the past decade. In line with the theoretical argument, preference homogeneity among donors as well as indicators for global activities and fragile states assistance are robust determinants of participation in (large) multi-donor funds. In contrast, donors tend to prefer single-donor trust funds in areas in which their national interests dominate. Although they could use bilateral aid for the same purpose, they often prefer to channel their contributions through trust funds at multilateral agencies. Donors thereby reduce their own administrative costs, while benefiting from the expertise of the multilateral agency. These findings confirm prior qualitative case studies and evidence from donor reports, suggesting that reduced reliance on single-donor trust funds?a costly instrument from the perspective of multilateral agencies?can improve the development effectiveness of aid.

Keywords: Non Governmental Organizations, Public Sector Management and Reform, Economics and Institutions

Suggested Citation

Reinsberg, Bernhard and Michaelowa, Katharina and Knack, Stephen, Which Donors, Which Funds? The Choice of Multilateral Funds by Bilateral Donors at the World Bank (October 14, 2015). World Bank Policy Research Working Paper No. 7441, Available at SSRN: https://ssrn.com/abstract=2674443

Bernhard Reinsberg

University of Cambridge ( email )

Trinity Ln
Cambridge, CB2 1TN
United Kingdom

University of Glasgow - School of Social and Political Sciences ( email )

United Kingdom

Katharina Michaelowa

University of Zurich - Centre for Comparative and International Studies (CIS) ( email )

Affolternstrasse 56
8050 Zurich
Switzerland

HOME PAGE: http://www.cis.ethz.ch/

Stephen Knack (Contact Author)

World Bank - Development Research Group (DECRG) ( email )

1818 H. Street, N.W.
MSN3-311
Washington, DC 20433
United States
202-458-9712 (Phone)

HOME PAGE: http://econ.worldbank.org/staff/sknack

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