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Multilateral Intermediation of Foreign Aid: What is the Trade-Off for Donor Countries?

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  • Matteo Bobba
  • Andrew Powell
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    Abstract

    Why 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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    File URL: http://www.iadb.org/document.cfm?pubDetail=1&id=1161510
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    Bibliographic Info

    Paper provided by Inter-American Development Bank in its series IDB Publications with number 6728.

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    Date of creation: Dec 2006
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    Handle: RePEc:idb:brikps:6728

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    Related research

    Keywords: Public Utilities; Multilateral; Intermediation; Foreign Aid; Donor Countries; WP-594;

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    Cited by:
    1. Andreas Fuchs & Peter Nunnenkamp & Hannes Öhler, 2013. "Why Donors of Foreign Aid Do Not Coordinate: The Role of Competition for Export Markets and Political Support," Kiel Working Papers 1825, Kiel Institute for the World Economy.

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