Poverty and Policy Selectivity of World Bank Trust Funds

30 Pages Posted: 19 Jul 2016

See all articles by Vera Z. Eichenauer

Vera Z. Eichenauer

KOF Swiss Economic Institute at ETH Zurich

Stephen Knack

World Bank - Development Research Group (DECRG)

Date Written: June 28, 2016


Over the past decade, donors of foreign aid quadrupled their annual contributions to trust funds at the World Bank. This earmarking of contributions to donors' preferred recipient countries and issues has raised concerns about the alignment of trust funds with the performance-based allocations of aid by the International Development Association, the World Bank's concessional lending arm, and raises the question of the role of this new "multi-bi" aid channel. This study finds that the cross-country allocations of aggregate trust fund aid are poverty- and policy-selective. In this respect, they are much more similar to allocations from the International Development Association than from bilateral donors. The allocations of trust fund types that are more closely controlled by donor countries?recipient-executed and single-donor trust funds?are more strongly related to the strategic interests of donor countries than trust fund aid in general. Trust funds for health and education aid are poverty selective and positively correlated with the World Bank's assessment of the quality of countries'sector policies, while environmental trust funds are neither poverty selective nor correlated with the assessed quality of countries' environmental policies. Overall, the evidence indicates that multi-bi funds administered by the World Bank do not undermine the International Development Association?s allocation criteria.

Keywords: Economics and Institutions, Public Sector Management and Reform, Conflict and Fragile States, Non Governmental Organizations

Suggested Citation

Eichenauer, Vera Z. and Knack, Stephen, Poverty and Policy Selectivity of World Bank Trust Funds (June 28, 2016). World Bank Policy Research Working Paper No. 7731, Available at SSRN: https://ssrn.com/abstract=2811379

Vera Z. Eichenauer (Contact Author)

KOF Swiss Economic Institute at ETH Zurich ( email )

Leonhardstrasse 21
Zürich, 8092

HOME PAGE: http://https://sites.google.com/view/vera-eichenauer/home

Stephen Knack

World Bank - Development Research Group (DECRG) ( email )

1818 H. Street, N.W.
Washington, DC 20433
United States
202-458-9712 (Phone)

HOME PAGE: http://econ.worldbank.org/staff/sknack

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