Which donors, which funds? Bilateral donors' choice of multilateral funds at the World Bank

Abstract

The rapid growth of trust funds at multilateral development organizations has been widely neglected in the academic literature. We examine sovereign donors' choices among various trust fund options and contend that the choice among the different trust funds involves a fundamental trade-off: larger funds provide donors with “burden-sharing” benefits, but each donor can better assert its individual preferences in a fund with fewer other donors. The theoretical considerations yield testable hypotheses on a range of factors affecting this fundamental trade-off, most notably the area of the trust fund's intervention and donor countries' competing domestic interests. A large-N analysis of participation decisions of OECD/DAC donors in trust funds over the past decade mostly corroborates these hypotheses. In particular, ex ante preference alignment among donors as well as indicators for global activities and fragile states aid are robust determinants of participation in (large) multi-donor funds. In contrast, a donor tends to prefer a single-donor fund in areas where its national interests dominate.