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.
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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