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The choice among aid donors: The effects of multilateral vs. bilateral aid on recipient behavioral support

Abstract

Scholars studying foreign assistance differ over whether multilateral aid is preferable to bilateral aid for promoting development, but nearly all build their cases primarily on highly aggregated cross-national time-series data. We investigate this topic experimentally from the perspective of those whom the foreign aid directly affects: recipient citizens and elites. We thus report results of a survey experiment with behavioral outcomes on more than 3000 Ugandan citizens and over 300 members of Uganda’s Parliament. In spite of a large literature suggesting differences, the findings generally reveal few substantive differences in citizens’ and elites’ preferences and behavior toward the two types of aid. While no strong pattern of differences emerges, limited evidence suggests that the public evinces greater trust in multilateral institutions, and both masses and elites feel that multilateral aid is more transparent. Overall, these null results inform an ever-expanding literature, which is increasingly articulating distinctions between multilateral and bilateral aid. At least in the minds of the recipients, however, multilateral and bilateral aid may not in fact be all that different. This accords with the literature noting the strong overlap in aid organizations and bemoaning the fact that they do not specialize more. Our results raise the question about why have both multilateral and bilateral aid donors if they in effect do the same thing.

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Notes

  1. 1.

    On the effectiveness of bilateral versus multilateral aid, see Alvi and Senbeta (2012); Headey (2008); Kizhakethalackal et al. (2013); Minoiu and Reddy (2007, 2010); Ram (2003, 2004). At the subnational level, see Dreher et al. (2016); Isaksson and Kotsadam (2016).

  2. 2.

    Publish What You Fund provides transparency rankings for all these donors, pooling multilaterals and bilaterals. Of 46 donors, the United States is rated fairly high (US Millenium Challenge Corporation ranks 2nd and US Agency for International Development ranks 19th), China ranks near the bottom at 45th, the World Bank IDA ranks quite high at 6th and the AfDB ranks 10th. These ratings are thus broadly consistent with Easterly and Pfutze (2008) in identifying multilateral donors as more transparent than bilaterals. (See http://ati.publishwhatyoufund.org/, accessed December 12, 2016.)

  3. 3.

    Prior to the mid-1990s, MDBs relied primarily on their procurement policies to curb corrupt practices. As a general rule, MDBs provide funding for public sector projects on the condition that the borrower selects the contractors in a competitive process, carried out in accordance with the procurement policies of the relevant MDB. Then in 2006, the five main MDBs, together with the International Monetary Fund and the European Investment Bank (EIB), established the International Financial Institutions Anti-Corruption Task Force to develop a catalogue of measures aimed at harmonizing the efforts of the participating institutions against fraud and corruption. The Task Force recommendations were published in September 2006 in a document titled ‘Uniform Framework for Preventing and Combating Fraud and Corruption’, which was subsequently endorsed by the participating institutions and hence was a crucial first step in the MDB’s efforts to coordinate their efforts against fraud and corruption. The Uniform Framework contained a set of harmonized definitions for sanctionable practices to be used by the participating institutions in all their operations. In 2010 five MDBs—AfDB, ADB, EBRD, IADB, and WB, signed the Mutual Enforcement Agreement (Seiler and Madir 2012).

  4. 4.

    These are the four of the five major “sectors” defined by OECD for categorizing aid. The fifth sector, social infrastructure, is pretty equally funded by the two types of donors.

  5. 5.

    Total n for the study was 3582. We do not focus on one condition from the experiment here and hence our observations are reduced. Results for other experimental conditions reported elsewhere (Milner et al. 2016; Findley et al. 2016).

  6. 6.

    In contrast to these earlier studies, which take on the question of preferences for aid vs. government spending, the present paper focuses centrally on the differences between multilateral and bilateral donors. In the earlier studies, the authors note in passing that there are no differences among donors, but only consider a simple test that allows them to pool in analyses of aid vs. government spending. Given the attention devoted to distinctions between multilateral and bilateral aid in the broader aid literature, the current study takes on this important questions and provides a thorough examination of the possible distinctions at both the mass and elite level, and in a large variety of subgroup analyses.

  7. 7.

    Manipulation checks for the masses show that subjects recalled the type of project and the type of donor in most cases (89% for project and 63% for donor). The manipulation check was asked much later than the manipulation itself, which may explain the dropoff. Table 3 reports the two refinements. First, we estimated the results when dropping subjects that did not pass the manipulation check. Second, we estimated complier average causal effects using assignment to treatment as an instrument to predict compliance (passing the manipulation check), which in turn predicts levels of support.

  8. 8.

    Subjects expected that they would pay the cost. Afterwards, however, we reimbursed them.

  9. 9.

    We surveyed 354 MPs total. But some received another condition. And of the total, 276 were of the 375 Members of the 9th Ugandan Parliament (the sitting legislature) and 78 were former MPs from the 8th Parliament. For our 339 MPs, 264 were current members and 75 were former.

  10. 10.

    For Uganda, the OECD Creditor Reporting System shows that it received only $0.2 m in 2010 for budget support from the USAID, which was 0.05% of total U.S. ODA received.

  11. 11.

    In 2010, according to the OECD Creditor Reporting System, the World Bank gave $100.9 m in budget support to Uganda. Uganda received 30.7% of IDA funds as budget support, while other developing countries received only 21.1%. Budget support is not the only group of funds that goes directly to the government, but it is the easiest to count.

  12. 12.

    Our survey also showed that Ugandans knew a lot about politics. Over 80% correctly identified their MP, and almost 70% correctly identified their woman MP as well.

  13. 13.

    The results for the transparency, conditionality, and efficacy mechanisms seem to be capturing a similar phenomenon given that the support index results are nearly identical across the three.

  14. 14.

    In two of the cases (transparency and efficacy), respondents preferred multilateral aid to bilateral aid even when they thought that bilateral aid was more transparent and efficacious. Thus the preference for multilateral aid is strong across the board, though statistically different only among those who perceive multilateral aid as more transparent and efficacious.

  15. 15.

    Using a global sample of elites and a different set of questions, Parks et al. (2016) find evidence indicating that elites rate multilateral donors higher than bilateral donors.

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Acknowledgements

We thank the editors and reviewers for valuable feedback as well as Pulapre Balakrishna, Kate Baldwin, Chris Blattman, Thad Dunning, Guy Grossman, Josh Gubler, Saad Gulzar, Jude Hayes, Darren Hawkins, Macartan Humphreys, Susan Hyde, Evan Lieberman, Robert Keohane, Kosuke Imai, Quinn Mecham, Scott Morgenstern, Kevin Morrison, Paul Poast, Dan Posner, Jessica Preece, Pia Raffler, Joel Selway, Dustin Tingley, Mike Tomz, and Jeremy Weinstein for their very helpful comments. Torben Behmer, Peter Carroll, Colby Clabaugh, Maddy Gleave, Raymond Hicks, Carlo Horz, Joan Ricart-Huguet, Brandon Miller de la Cuesta, and Elizabeth Nugent also provided invaluable research assistance.

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Correspondence to Michael G. Findley.

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Because one of the article authors was also an editor of the special issue, for this manuscript the standing editor exclusively handled all correspondence and decisions. An online appendix and replication data accompany this article and appear on the Review of International Organizations website as well as at www.michael-findley.com.

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Findley, M.G., Milner, H.V. & Nielson, D.L. The choice among aid donors: The effects of multilateral vs. bilateral aid on recipient behavioral support. Rev Int Organ 12, 307–334 (2017) doi:10.1007/s11558-017-9275-2

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Keywords

  • Foreign aid
  • Experiments
  • Foreign donors
  • International organizations

JEL classifications

  • F35
  • F53
  • C93
  • C83