Publication: Which Donors, Which Funds?: The Choice of Multilateral Funds by Bilateral Donors at the World Bank
Date
2015-10
ISSN
Published
2015-10
Author(s)
Reinsberg, Bernhard
Michaelowa, Katharina
Knack, Stephen
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.
Citation
“Reinsberg, Bernhard; Michaelowa, Katharina; Knack, Stephen. 2015. Which Donors, Which Funds?: The Choice of Multilateral Funds by Bilateral Donors at the World Bank. Policy Research Working Paper;No. 7441. © World Bank, Washington, DC. http://hdl.handle.net/10986/22872 License: CC BY 3.0 IGO.”
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