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

23 Pages Posted: 25 Apr 2011

See all articles by Matteo Bobba

Matteo Bobba

Inter-American Development Bank (IDB) - Research Department

Andrew Powell

Inter-American Development Bank (IDB); Universidad Torcuato Di Tella - School of Business; Harvard University - Center for International Development (CID)

Date Written: December 2006

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.

Suggested Citation

Bobba, Matteo and Powell, Andrew P. and Powell, Andrew P., Multilateral Intermediation of Foreign Aid: What is the Trade-Off for Donor Countries? (December 2006). IDB Working Paper No. 497, Available at SSRN: https://ssrn.com/abstract=1820070 or http://dx.doi.org/10.2139/ssrn.1820070

Matteo Bobba (Contact Author)

Inter-American Development Bank (IDB) - Research Department ( email )

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Andrew P. Powell

Universidad Torcuato Di Tella - School of Business ( email )

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Argentina
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Inter-American Development Bank (IDB) ( email )

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United States

Harvard University - Center for International Development (CID) ( email )

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