What determines earmarked funding to international development organizations? Evidence from the new multi-bi aid data
Earmarked aid to international organizations has quadrupled over the last two decades and now represents almost 20% of total aid. This paper introduces a new dataset on earmarked aid, which alternatively has been referred to as multi-bi, restricted, non-core or trust fund aid. The data make it possible to track the rise of the new aid channel over an extended time period and in greater detail regarding, e.g., the implementing multilateral organizations. The data include more than 100,000 earmarked projects of 23 OECD donors to 290 multilateral institutions from 1990 to 2012. We graphically illustrate the patterns in earmarked aid for all actors: donor governments and their aid-providing agencies, multilateral organizations, and recipient countries. We also highlight promising research questions that can be analyzed with the multi-bi data. In a first empirical application of the data, we analyze four suggested donor motives for earmarked aid at the donor-recipient level. Contrary to donor claims, we find that earmarked aid and bilateral aid target the same recipients. We also find evidence that some donors use earmarked aid to bypass recipient countries with weak governance. Overall, our explorative analysis suggests that earmarked aid serves many purposes and that donors use it in different ways. This calls for more fine-grained research on the reasons and implications for earmarked aid.
KeywordsForeign aid Aid delivery channels Earmarked aid Delegation Principal-agent Collective principal
JEL classificationsF35 F53 F59 O19
- Bayram, A. B., & Graham, E. (forthcoming). Financing global governance: explaining donor funding patterns at international organizations. Review of International Organizations.Google Scholar
- Eichenauer, V. Z. (2015). Trust funds: DAC donors contribute, Most Non-DAC donors don’t. http://aiddata.org/blog/trust-funds-dac-donors-contribute-most-non-dac-donors-dont. Accessed Oct 2016.
- Eichenauer, V. Z., & Hug, S. (2015). The politics of special purpose trust funds. Unpublished manuscript. Heidelberg: Heidelberg University.Google Scholar
- Eichenauer, V. Z., & Reinsberg, B. (2014). Multi-bi aid: tracking the evolution of earmarked funding to international development organizations from 1990 to 2012. Codebook. Zurich: CIS Working Paper No. 84.Google Scholar
- Fuchs, A., & Richert, K. (2015). Who is the development minister and does (s)he matter? Unpublished manuscript. Heidelberg: Heidelberg University.Google Scholar
- Hawkins, D. G., Lake, D. A., Nielson, D. L., & Tierney, M. J. (Eds.). (2006). Delegation and agency in international organizations. Cambridge: Cambridge University Press.Google Scholar
- IEG. (2011). An evaluation of the World Bank’s trust fund portfolio: trust fund support for development. Independent Evaluation Group: Washington.Google Scholar
- Michaelowa, K., Reinsberg, B., & Schneider, C. (2016). Multi-bi aid in European Development Assistance: The role of capacity constraints and member state politics. Development Policy Review. doi:10.1111/dpr.12193.
- Milner, H. (2006). Why multilateralism? Foreign aid and domestic principal-agent problems. In D. G. Hawkins et al. (Eds.), Delegation and agency in international organizations. New York: Cambridge University Press.Google Scholar
- OECD. (2010). 2010 DAC report on multilateral aid. Paris: Organisation for Economic Co-operation and Development.Google Scholar
- OECD. (2011). 2011 DAC report on multilateral aid. Paris: Organisation for Economic Co-operation and Development.Google Scholar
- OECD (2013). OECD/DAC creditor reporting system. Paris: Organisation for Economic Co-operation and Development. Accessed Sept 2012 and July 2013.Google Scholar
- Reinsberg, B. (2016). The implications of multi-bi financing on international development organizations: the example of the World Bank. In T. Mahn, M. Negre, & S. Klingebiel (Eds.), The fragmentation of aid: concepts, measurements and implications for development cooperation (pp. 185–198). Basingstoke: Palgrave McMillan.CrossRefGoogle Scholar
- Reinsberg, B. (2017). Organizational reform and the rise of trust funds: Lessons from the World Bank. Review of International Organizations. doi:10.1007/s11558-017-9268-1.
- Reinsberg, B., Michaelowa, K., & Eichenauer, V. Z. (2015a). The proliferation of trust funds and other multi-bi aid. In M. Arvin & B. Lew (Eds.), Handbook of foreign aid. Cheltenham: Edward Elgar.Google Scholar
- Reinsberg, B., Michaelowa, K., & Knack, S. (2015b). Which donors, which funds? The choice of trust funds by bilateral donors at the World Bank. World Bank Policy Research Working Paper No. 7441. Washington: World Bank.Google Scholar
- Schneider, C. J., & Tobin, J. L. (2011). Eenie, Meenie, Miney, Moe? Institutional portfolios and delegation to multilateral aid institutions. Unpublished manuscript. University of San Diego, California.Google Scholar
- UN. (2012). Analysis of funding of operational activities for development of the United Nations system for the year 2010. New York: Report of the Secretary General. UN Department of Economic and Social Affairs.Google Scholar
- Wagner, L. (2016). How do earmarked funds change the geographical allocation of multilateral assistance? FERDI Discussion Paper No. 150.Google Scholar