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Multilateral Intermediation of Foreign Aid: what is the trade off for donor countries?

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Author Info
Matteo Bobba () (Inter-American Development Bank)
Andrew Powell () (Inter-American Development Bank)

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Abstract

Why would bilateral donors intermediate aid through a multilateral and not extend aid directly? We suggest 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. We conduct traditional panel and truly bilateral regressions with bilateral-pair, fixed-effects to model aid allocation decisions. We 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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Paper provided by Inter-American Development Bank, Research Department in its series RES Working Papers with number 1026.

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Length: 29
Date of creation: Nov 2006
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Handle: RePEc:idb:wpaper:1026

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Related research
Keywords: Aid Capital Flows Multilaterals Panel

Find related papers by JEL classification:
F34 - International Economics - - International Finance - - - International Lending and Debt Problems
F35 - International Economics - - International Finance - - - Foreign Aid
O19 - Economic Development, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations

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This page was last updated on 2008-7-2.


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