Publication: Poverty and Policy Selectivity of World Bank Trust Funds
Loading...
Date
2016-06
ISSN
Published
2016-06
Author(s)
Editor(s)
Abstract
Over the past decade, donors of foreign aid quadrupled their annual contributions to trust funds at the World Bank. This earmarking of contributions to donors' preferred recipient countries and issues has raised concerns about the alignment of trust funds with the performance-based allocations of aid by the International Development Association, the World Bank's concessional lending arm, and raises the question of the role of this new "multi-bi" aid channel. This study finds that the cross-country allocations of aggregate trust fund aid are poverty- and policy-selective. In this respect, they are much more similar to allocations from the International Development Association than from bilateral donors. The allocations of trust fund types that are more closely controlled by donor countries—recipient-executed and single-donor trust funds—are more strongly related to the strategic interests of donor countries than trust fund aid in general. Trust funds for health and education aid are poverty selective and positively correlated with the World Bank's assessment of the quality of countries' sector policies, while environmental trust funds are neither poverty selective nor correlated with the assessed quality of countries' environmental policies. Overall, the evidence indicates that multi-bi funds administered by the World Bank do not undermine the International Development Association’s allocation criteria.
Link to Data Set
Citation
“Eichenauer, Vera; Knack, Stephen. 2016. Poverty and Policy Selectivity of World Bank Trust Funds. Policy Research Working Paper;No. 7731. © World Bank. http://hdl.handle.net/10986/24648 License: CC BY 3.0 IGO.”
Associated URLs
Associated content
Other publications in this report series
Publication Geopolitics and the World Trading System(Washington, DC: World Bank, 2024-12-23)Until the beginning of this century, the GATT/WTO system worked. Economic research provided a compelling explanation. It showed that if governments maximize the well-being of their own countries broadly defined, GATT/WTO principles would facilitate mutually beneficial cooperation over their trade policy choices. Now heightened geopolitical rivalry seems to have undermined the WTO. A simple transposition of the previous rationalization suggests that geopolitics and trade cooperation are not compatible. The paper shows that this is only true if rivalry eclipses any consideration of own-country well-being. In all other circumstances, there are gains from trade cooperation even with geopolitics. Furthermore, the WTO’s relevance is in question only if it adheres too rigidly to its existing rules and norms. Through measured adaptation to the geopolitical imperative, the WTO can continue to thrive as a forum for multilateral trade cooperation in the age of geopolitics.Publication The Macroeconomic Implications of Climate Change Impacts and Adaptation Options(Washington, DC: World Bank, 2025-05-29)Estimating the macroeconomic implications of climate change impacts and adaptation options is a topic of intense research. This paper presents a framework in the World Bank's macrostructural model to assess climate-related damages. This approach has been used in many Country Climate and Development Reports, a World Bank diagnostic that identifies priorities to ensure continued development in spite of climate change and climate policy objectives. The methodology captures a set of impact channels through which climate change affects the economy by (1) connecting a set of biophysical models to the macroeconomic model and (2) exploring a set of development and climate scenarios. The paper summarizes the results for five countries, highlighting the sources and magnitudes of their vulnerability --- with estimated gross domestic product losses in 2050 exceeding 10 percent of gross domestic product in some countries and scenarios, although only a small set of impact channels is included. The paper also presents estimates of the macroeconomic gains from sector-level adaptation interventions, considering their upfront costs and avoided climate impacts and finding significant net gross domestic product gains from adaptation opportunities identified in the Country Climate and Development Reports. Finally, the paper discusses the limits of current modeling approaches, and their complementarity with empirical approaches based on historical data series. The integrated modeling approach proposed in this paper can inform policymakers as they make proactive decisions on climate change adaptation and resilience.Publication Global Poverty Revisited Using 2021 PPPs and New Data on Consumption(Washington, DC: World Bank, 2025-06-05)Recent improvements in survey methodologies have increased measured consumption in many low- and lower-middle-income countries that now collect a more comprehensive measure of household consumption. Faced with such methodological changes, countries have frequently revised upward their national poverty lines to make them appropriate for the new measures of consumption. This in turn affects the World Bank’s global poverty lines when they are periodically revised. The international poverty line, which is based on the typical poverty line in low-income countries, increases by around 40 percent to $3.00 when the more recent national poverty lines as well as the 2021 purchasing power parities are incorporated. The net impact of the changes in international prices, the poverty line, and new survey data (including new data for India) is an increase in global extreme poverty by some 125 million people in 2022, and a significant shift of poverty away from South Asia and toward Sub-Saharan Africa. The changes at higher poverty lines, which are more relevant to middle-income countries, are mixed.Publication Global Socio-economic Resilience to Natural Disasters(Washington, DC: World Bank, 2025-05-22)Most disaster risk assessments use damages to physical assets as their central metric, often neglecting distributional impacts and the coping and recovery capacity of affected people. To address this shortcoming, the concepts of well-being losses and socio-economic resilience—the ability to experience asset losses without a decline in well-being—have been proposed. This paper uses microsimulations to produce a global estimate of well-being losses from, and socio-economic resilience to, natural disasters, covering 132 countries. On average, each $1 in disaster-related asset losses results in well-being losses equivalent to a $2 uniform national drop in consumption, with significant variation within and across countries. The poorest income quintile within each country incurs only 9% of national asset losses but accounts for 33% of well-being losses. Compared to high-income countries, low-income countries experience 67% greater well-being losses per dollar of asset losses and require 56% more time to recover. Socio-economic resilience is uncorrelated with exposure or vulnerability to natural hazards. However, a 10 percent increase in GDP per capita is associated with a 0.9 percentage point gain in resilience, but this benefit arises indirectly—such as through higher rate of formal employment, better financial inclusion, and broader social protection coverage—rather than from higher income itself. This paper assess ten policy options and finds that socio-economic and financial interventions (such as insurance and social protection) can effectively complement asset-focused measures (e.g., construction standards) and that interventions targeting low-income populations usually have higher returns in terms of avoided well-being losses per dollar invested.Publication From Patriarchy to Policy(Washington, DC: World Bank, 2025-05-29)Legal institutions play an important role in shaping gender equality in economic domains, from inheritance to labor markets. But where do gender equal laws come from? Using cross-country data on social norms and legal equality, this paper investigates the socio-cultural roots of gender inequity in the legal system and its implications for female labor force participation. To identify the impact of social norms, the analysis uses an empirical strategy that exploits pre-modern differences in ancestral patriarchal culture as an instrument for present-day gender norms. The findings show that ancestral patriarchal culture is a strong predictor of contemporary norms, and conservative social norms are associated with more gender inequality in the de jure legal framework, the de facto implementation of laws, and the labor market. The paper presents evidence for a political selection mechanism linking norms to laws: countries with more conservative norms elect political leaders who are more hostile to gender equality, who then pass less progressive legislation. The results highlight the cultural roots and political drivers of legalized gender inequality.
Journal
Journal Volume
Journal Issue
Collections
Related items
Showing items related by metadata.
Publication Financing Peace(World Bank, Washington, DC, 2010-10-06)After more than a decade of experience and research on financing arrangements in post conflict countries and fragile states, a consensus has emerged on at least one matter. The core objective is to build effective and legitimate governance structures that secure public confidence through provision of personal security, equal justice and the rule of law, economic well-being, and essential social services including education and health. These governance structures are necessary to ensure that countries do not turn, or turn back, to violence as a means of negotiating state-societal relations. This paper discusses a number of the weaknesses in current financing arrangements for post conflict countries and fragile states, with a focus on Official Development Assistance (ODA). We argue that tensions persist between business-as-usual development policies on the one hand and policies responsive to the demands of peace building on the other. The preferential allocation of aid to 'good performers,' in the name of maximizing its payoff in terms of economic growth, militates against aid to fragile and conflict-affected states. If the aim of aid is redefined to include durable peace, the conventional performance criteria for aid allocation lose much of their force. Compelling arguments can be made for assistance to 'poor performers' if this can help to prevent conflict. Yet the difficulties that initially prompted donors to become more selective in aid allocation remain all too real. Experience has shown that aid can exacerbate problems rather than solving them.Publication Capacity Constraints and Public Financial Management in Small Pacific Island Countries(World Bank, Washington, DC, 2012-12)Drawing on Public Expenditure and Financial Accountability assessment scores from 118 countries, this paper provides the first comparative analysis of public financial management performance in small Pacific Island Countries (PICs). It applies a Tobit regression model across the full cross-country sample of Public Expenditure and Financial Accountability scores and country variables to identify potential causes for the observed underperformance of Pacific Island countries relative to other countries of similar income. First, the analysis finds small population size to be negatively correlated with Public Expenditure and Financial Accountability scores, with the "population penalty" faced by small Pacific Island countries sufficient to explain observed underperformance. Second, through application of a new capacity index of Public Expenditure and Financial Accountability dimensions, it finds strong evidence in support of the hypothesis that small population size impacts scores through the imposition of capacity constraints: with a limited pool of human capital, small countries face severe and permanent challenges in accessing an adequate range and depth of technical skills to fulfill all functions assessed through the Public Expenditure and Financial Accountability framework. These findings suggest that approaches to strengthening public financial management in small Pacific Island countries should involve: i) careful prioritization of public financial management capacity toward areas that represent binding constraints to development; ii) adoption of public financial management systems that can function within inherent and binding capacity constraints, rather than wholesale adoption of "best practice" imported systems; and iii) consideration of options for accessing external capacity to support public financial management systems on a long-term basis, from regional agencies, the private sector, or donors.Publication Trust Fund Support for Development : An Evaluation of the World Bank's Trust Fund Portfolio(Washington, DC: World Bank Group, 2011)In the changing global environment of development cooperation, trust funds have emerged as a significant pillar of the global aid architecture, used to address limitations in bilateral aid and fill perceived gaps in the operations of existing multilateral institutions. They currently account for about 11 percent of official development assistance (ODA), and they finance a substantial part of the World Bank's business. The activities they fund are highly varied, ranging from huge global programs with their own governance structures to conventional development projects, debt and disaster relief operations, and technical assistance. This IEG evaluation, undertaken at the request of World Bank executive directors, assesses the value of the trust fund vehicle as a way of delivering aid and the effectiveness and efficiency of the deployment of trust fund resources. In addition, the evaluation assesses the Bank's management and accountability for the use of trust fund resources and the impact of trust funds on the Bank's development role. The evaluation finds that donors, recipients, and the World Bank have considerable overlapping interests in this vehicle, but their interests may diverge on specific issues such as how trust fund allocation decisions are made and how trust funds are governed and managed. Furthermore, while trust funds can add value by providing coordinated grant financing for specific countries, development issues, and especially global public goods, the deployment of trust fund resources does not consistently work in accordance with the Paris Declaration aid principles of country ownership and donor coordination. Notably, many trust funds of global scope involve insufficient recipient participation and lack clear outcome objectives. For other trust funds, a three-pillar approach consisting of country-specific trust funds; global and regional partnership programs; and multi-donor, multi-recipient umbrella facilities will allow the Bank to strengthen the effectiveness, efficiency, and accountability for results.Publication Government Spending Multipliers in Developing Countries : Evidence from Lending by Official Creditors(World Bank, Washington, DC, 2012-06)This paper uses a novel loan-level dataset covering lending by official creditors to developing country governments to construct an instrument for public spending that can be used to estimate government spending multipliers. Loans from official creditors (primarily multilateral development banks and bilateral aid agencies) are a major source of financing for government spending in developing countries. These loans typically finance public spending projects that take several years to implement, with multiple disbursements linked to the stages of project implementation. The long disbursement periods for these loans imply that the bulk of government spending financed by official creditors in a given year reflects loan approval decisions made in many previous years, before current-year macroeconomic shocks are known. Loan-level commitment and disbursement transactions from the World Bank's Debtor Reporting System database are used to isolate a predetermined component of government spending associated with past loan approvals. This can be used as an instrument to estimate spending multipliers for a large sample of 102 developing countries. The one-year government spending multiplier is reasonably-precisely estimated to be around 0.4, and there is some suggestive evidence that multipliers are larger in recessions, in countries less exposed to international trade, and in countries with flexible exchange rate regimes.Publication Multilateral Debt Relief through the Eyes of Financial Markets(2009-03-01)The economic benefits of debt relief for recipient countries have been the subject of arduous debate, at least partly motivated by the difficulty of identifying the causal effect of debt relief on economic performance-given that performance itself may drive the decision to grant relief. This paper conducts an event study to assess the economic consequences of multilateral debt relief for recipient countries that is robust to these reverse causality issues. It estimates the response of the stock prices of South African multinationals with subsidiaries in those countries to the announcement of debt relief initiatives, and shows that stock prices exhibit a significant increase above those of other firms, especially around the launching of the recent Multilateral Debt Relief Initiative. The improvement in financial markets' assessment of the value of these multinationals is consistent with lower expected levels of future taxation in the recipient countries. Overall, the results are consistent with the "debt overhang" argument for debt relief.
Users also downloaded
Showing related downloaded files
Publication Remarks at the United Nations Biodiversity Conference(World Bank, Washington, DC, 2021-10-12)World Bank Group President David Malpass discussed biodiversity and climate change being closely interlinked, with terrestrial and marine ecosystems serving as critically important carbon sinks. At the same time climate change acts as a direct driver of biodiversity and ecosystem services loss. The World Bank has financed biodiversity conservation around the world, including over 116 million hectares of Marine and Coastal Protected Areas, 10 million hectares of Terrestrial Protected Areas, and over 300 protected habitats, biological buffer zones and reserves. The COVID pandemic, biodiversity loss, climate change are all reminders of how connected we are. The recovery from this pandemic is an opportunity to put in place more effective policies, institutions, and resources to address biodiversity loss.Publication Media and Messages for Nutrition and Health(World Bank, Washington, DC, 2020-06)The Lao People’s Democratic Republic (Lao PDR) has experienced rapid and significant economic growth over the past decade. However, poor nutritional outcomes remain a concern. Rates of childhood undernutrition are particularly high in remote, rural, and upland areas. Media have the potential to play an important role in shaping health and nutrition–related behaviors and practices as well as in promoting sociocultural and economic development that might contribute to improved nutritional outcomes. This report presents the results of a media audit (MA) that was conducted to inform the development and production of mass media advocacy and communication strategies and materials with a focus on maternal and child health and nutrition that would reach the most people from the poorest communities in northern Lao PDR. Making more people aware of useful information, essential services and products and influencing them to use these effectively is the ultimate goal of mass media campaigns, and the MA measures the potential effectiveness of media efforts to reach this goal. The effectiveness of communication channels to deliver health and nutrition messages to target beneficiaries to ensure maximum reach and uptake can be viewed in terms of preferences, satisfaction, and trust. Overall, the four most accessed media channels for receiving information among communities in the study areas were village announcements, mobile phones, television, and out-of-home (OOH) media. Of the accessed media channels, the top three most preferred channels were village announcements (40 percent), television (26 percent), and mobile phones (19 percent). In terms of trust, village announcements were the most trusted source of information (64 percent), followed by mobile phones (14 percent) and television (11 percent). Hence of all the media channels, village announcements are the most preferred, have the most satisfied users, and are the most trusted source of information in study communities from four provinces in Lao PDR with some of the highest burden of childhood undernutrition.Publication South Asia Development Update, April 2024: Jobs for Resilience(Washington, DC: World Bank, 2024-04-02)South Asia is expected to continue to be the fastest-growing emerging market and developing economy (EMDE) region over the next two years. This is largely thanks to robust growth in India, but growth is also expected to pick up in most other South Asian economies. However, growth in the near-term is more reliant on the public sector than elsewhere, whereas private investment, in particular, continues to be weak. Efforts to rein in elevated debt, borrowing costs, and fiscal deficits may eventually weigh on growth and limit governments' ability to respond to increasingly frequent climate shocks. Yet, the provision of public goods is among the most effective strategies for climate adaptation. This is especially the case for households and farms, which tend to rely on shifting their efforts to non-agricultural jobs. These strategies are less effective forms of climate adaptation, in part because opportunities to move out of agriculture are limited by the region’s below-average employment ratios in the non-agricultural sector and for women. Because employment growth is falling short of working-age population growth, the region fails to fully capitalize on its demographic dividend. Vibrant, competitive firms are key to unlocking the demographic dividend, robust private investment, and workers’ ability to move out of agriculture. A range of policies could spur firm growth, including improved business climates and institutions, the removal of financial sector restrictions, and greater openness to trade and capital flows.Publication The Journey Ahead(Washington, DC: World Bank, 2024-10-31)The Journey Ahead: Supporting Successful Migration in Europe and Central Asia provides an in-depth analysis of international migration in Europe and Central Asia (ECA) and the implications for policy making. By identifying challenges and opportunities associated with migration in the region, it aims to inform a more nuanced, evidencebased debate on the costs and benefits of cross-border mobility. Using data-driven insights and new analysis, the report shows that migration has been an engine of prosperity and has helped address some of ECA’s demographic and socioeconomic disparities. Yet, migration’s full economic potential remains untapped. The report identifies multiple barriers keeping migration from achieving its full potential. Crucially, it argues that policies in both origin and destination countries can help maximize the development impacts of migration and effectively manage the economic, social, and political costs. Drawing from a wide range of literature, country experiences, and novel analysis, The Journey Ahead presents actionable policy options to enhance the benefits of migration for destination and origin countries and migrants themselves. Some measures can be taken unilaterally by countries, whereas others require close bilateral or regional coordination. The recommendations are tailored to different types of migration— forced displacement as well as high-skilled and low-skilled economic migration—and from the perspectives of both sending and receiving countries. This report serves as a comprehensive resource for governments, development partners, and other stakeholders throughout Europe and Central Asia, where the richness and diversity of migration experiences provide valuable insights for policy makers in other regions of the world.Publication Economic Recovery(World Bank, Washington, DC, 2021-04-06)World Bank Group President David Malpass spoke about the world facing major challenges, including COVID, climate change, rising poverty and inequality and growing fragility and violence in many countries. He highlighted vaccines, working closely with Gavi, WHO, and UNICEF, the World Bank has conducted over one hundred capacity assessments, many even more before vaccines were available. The World Bank Group worked to achieve a debt service suspension initiative and increased transparency in debt contracts at developing countries. The World Bank Group is finalizing a new climate change action plan, which includes a big step up in financing, building on their record climate financing over the past two years. He noted big challenges to bring all together to achieve GRID: green, resilient, and inclusive development. Janet Yellen, U.S. Secretary of the Treasury, mentioned focusing on vulnerable people during the pandemic. Kristalina Georgieva, Managing Director of the International Monetary Fund, focused on giving everyone a fair shot during a sustainable recovery. All three commented on the importance of tackling climate change.