Multilateral Intermediation of Foreign Aid: What is the Trade-Off for Donor Countries?
AbstractWhy would bilateral donors intermediate aid through a multilateral and not extend aid directly? This paper suggests a trade-off: multiple bilateral donors for each recipient may imply coordination and strategic problems but intermediating through a multilateral may dilute individual donor objectives. The paper conducts traditional panel and truly bilateral regressions with bilateral-pair, fixed effects to model aid allocation decisions. The results confirm that politics is important for bilateral donors but also that aid fragmentation and strategic behavior affect aid allocation. Multilaterals solve strategic and coordination problems between donors and, while politics remains significant, there is some evidence for a dilution of this effect.
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Bibliographic InfoPaper provided by Inter-American Development Bank in its series IDB Publications with number 6728.
Date of creation: Dec 2006
Date of revision:
Public Utilities; Multilateral; Intermediation; Foreign Aid; Donor Countries; WP-594;
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