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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
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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Paper provided by Inter-American Development Bank, Research Department in its series RES Working Papers with number 4500.

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Date of creation: Dec 2006
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Handle: RePEc:idb:wpaper:4500

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Birdsall, Nancy & Claessens, Stijn & Diwan, Ishac, 2002. "Will HIPC Matter? The Debt Game and Donor Behaviour in Africa," Working Papers UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER). [Downloadable!]
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  2. Torsvik, Gaute, 2005. "Foreign economic aid; should donors cooperate?," Journal of Development Economics, Elsevier, vol. 77(2), pages 503-515, August. [Downloadable!] (restricted)
  3. Craig Burnside & David Dollar, 2000. "Aid, Policies, and Growth," American Economic Review, American Economic Association, vol. 90(4), pages 847-868, September. [Downloadable!] (restricted)
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  4. Faini, Riccardo & Grilli, Enzo, 2004. "Who Runs the IFIs?," CEPR Discussion Papers 4666, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  5. Trumbull, William N & Wall, Howard J, 1994. "Estimating Aid-Allocation Criteria with Panel Data," Economic Journal, Royal Economic Society, vol. 104(425), pages 876-82, July. [Downloadable!] (restricted)
  6. David Roodman, 2006. "Competitive Proliferation of Aid Projects: A Model," Working Papers 89, Center for Global Development. [Downloadable!]
  7. Barro, Robert J. & Lee, Jong-Wha, 2005. "IMF programs: Who is chosen and what are the effects?," Journal of Monetary Economics, Elsevier, vol. 52(7), pages 1245-1269, October. [Downloadable!] (restricted)
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  8. Gilbert, Christopher & Powell, Andrew & Vines, David, 1999. "Positioning the World Bank," Economic Journal, Royal Economic Society, vol. 109(459), pages F598-633, November. [Downloadable!] (restricted)
  9. Alberto Chong & Mark Gradstein, 2006. "Who's Afraid of Foreign Aid? The Donors' Perspective," RES Working Papers 4452, Inter-American Development Bank, Research Department. [Downloadable!]
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  10. Alesina, Alberto & Dollar, David, 2000. " Who Gives Foreign Aid to Whom and Why?," Journal of Economic Growth, Springer, vol. 5(1), pages 33-63, March. [Downloadable!] (restricted)
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  11. Raghuram G. Rajan & Arvind Subramanian, 2005. "Aid and Growth: What Does the Cross-Country Evidence Really Show?," NBER Working Papers 11513, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Eduardo A. Cavallo & Patricio Valenzuela & Eduardo Borensztein, 2007. "La Sostenibilidad de Deuda frente a Riesgo de Catastrofes Naturales," RES Working Papers 4523, Inter-American Development Bank, Research Department. [Downloadable!]
  2. Eduardo A. Cavallo & Patricio Valenzuela & Eduardo Borensztein, 2007. "Debt Sustainability under Catastrophic Risk: The Case for Government Budget Insurance," RES Working Papers 4522, Inter-American Development Bank, Research Department. [Downloadable!]
    Other versions:
  3. Matteo Bobba & Andrew Powell, 2007. "Aid and Growth: Politics Matters," RES Working Papers 4511, Inter-American Development Bank, Research Department. [Downloadable!]
  4. Carmen Altés, 2008. "Turismo y desarrollo en México," RES Working Papers 2008, Inter-American Development Bank, Research Department. [Downloadable!]
  5. Matteo Bobba & Andrew Powell, 2007. "Ayuda y crecimiento: La política importa," RES Working Papers 4512, Inter-American Development Bank, Research Department. [Downloadable!]
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