Organizational reform and the rise of trust funds: Lessons from the World Bank
Over the past two decades, earmarked funding to international development organizations through special-purpose trust funds has increased greatly. This paper studies the incentives for trust funds from the perspective of multilateral agencies, notably the World Bank. A theoretically intriguing type of funds are so-called “pass-on funds,” in which one unit hosts the fund, then passes on its resources to another type of unit for implementation. Each unit has different preferences for the specific types of activities to be supported by the fund. Interviews with World Bank staff and complementary documents demonstrate the rationale for pass-on funds and the associated division of labor between fundraising network units and implementing regional units. While pass-on funds reflect an efficient division of labor between functionally specialized units, they increase the misalignment between sector-specific global priorities and country-specific needs. Organizational reform drove the sudden explosion of pass-on funds around the millennium turn, facilitated by growing availability of donor monies for specific sectors and by lenient internal regulation. Organizational reform undermined budget autonomy of sector units, causing those units to seek new funds in their areas of expertise. A number of reform features also reduced administrative budgets of country units, increasing their demand for pass-on funding grants. The results contribute to the emerging literature on earmarked funding and highlight the need to consider international organizations as heterogeneous actors.
KeywordsTrust funds Multilateral agencies Bureaucratic politics Collective agents
JEL ClassificationD73 F13 O19
- Bagchi, C., Castro, P., & Michaelowa, K. (2016). Donor accountability reconsidered: Aid allocation in the age of global public goods. Presented at Swiss Political Science Conference, Basel, January 28–29.Google Scholar
- Barakat, S., Rzeszut, K., & Martin, N. (2012). What is the track record of multi-donor trust funds in improving aid effectiveness. DFID and EPPI-Centre, University of London.Google Scholar
- Barnett, M., & Finnemore, M. (2004). Rules for the world: International organizations in global politics. Ithaca: Cornell University Press.Google Scholar
- Bayram, B., & Graham, E. (2016). Financing Global Governance: Explaining Donor Funding Patterns at International Organizations, Drexel University, mimeo.Google Scholar
- Brechin, S. R., & Ness, G. D. (2013). Looking back at the gap: international organizations as organizations twenty-five years later. Journal of International Organizations Studies, 4, 14–39.Google Scholar
- Bryner, G. C. (1987). Bureaucratic discretion. New York: Pergamon Press.Google Scholar
- Caughey, D., Chatfield, S., & Cohon, A. (2009). Defining, mapping, and measuring bureaucratic autonomy, Presented at Midwest Political Science Conference, April 2-5.Google Scholar
- Danaher, K. (Ed.) (1994). 50 years is enough: the case against the World Bank and the International Monetary Fund. New York: South End Press.Google Scholar
- Downs, A. (1967). Inside bureaucracy. Santa Monica: Rand Corporation.Google Scholar
- Dunleavy, P. (1991). Bureaucracy, democracy and public choice. Hemel Hemsted: Harvester Wheatsheaf.Google Scholar
- Eichenauer, V., & Hug, S. (2015). The politics of special purpose trust funds, Paper presented at the PEIO Conference, February 12-14, Berlin.Google Scholar
- Eichenauer, V., & Reinsberg, B. (2017). What determines earmarked funding to international development organizations? Evidence from the new multi-bi aid data. Review of International Organizations, doi: 10.1007/s11558-017-9267-2.
- Gehring, T. (2009). Die Autonomie Internationaler Organisationen. Lehren aus der systemtheoretischen Organisationstheorie. In Dingwerth, K. et al. (Eds.) Die Organisierte Welt. Internationale Beziehungen und Organisationsforschung (pp 60–95).Google Scholar
- Graham, E. R. (2013). International organizations as collective agents: Fragmentation and the limits of principal control at the World Health Organization. European Journal of International Relations, 1, 1–25.Google Scholar
- Graham, E. R. (2016). The institutional design of funding rules at international organizations: Explaining the transformation in financing the United Nations. European Journal of International Relations. doi:10.1177/1354066116648755.
- Haas, E. B. (1964). Beyond the Nation-state: Functionalism and International Organization. Stanford: Stanford University Press.Google Scholar
- Hawkins, D. G., & Jacoby, W. (2006) In Hawkins, D., & et al. (Eds.), How agents matter, (pp. 199–227). Cambridge: Cambridge University Press.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
- Heimans, J. (2004). Multiactor global funds: New tools to address urgent global problems, WIDER Research Paper No. 2004/47. Helsinki: World Institute for Development Economics Research.Google Scholar
- Honig, D. (2015). Navigating by Judgment: Organizational Structure, Autonomy, and Country Context in Delivering Foreign Aid, Presented at the Political Economy of International Organizations conference, Berlin, Feburary 12-14.Google Scholar
- IEG. (2011). Trust fund support for development: an evaluation of the World Bank’s trust fund portfolio, Independent Evaluation Group. Washington D.C.: World Bank.Google Scholar
- IEG. (2014). Learning and Results in World Bank Operations: How the Bank Learns – Evaluation 1. Washington D.C.: World Bank.Google Scholar
- Jolly, R. (2014). UNICEF (United Nations Children’s Fund): Global Governance that Works. London: Routledge.Google Scholar
- Lake, D. A., & McCubbins, M. D. (2006). The logic of delegation to international organizations. In Delegation and agency in international organizations (pp. 341–368).Google Scholar
- Linn, J. F. (1998). Unfunded mandates: a difficult juggling act. In World Bank Staff Association Newsletter. Washington D.C.: World Bank.Google Scholar
- Lyne, M. M., Nielson, D. L., & Tierney, M. J. (2006). Who delegates? Alternative models of principals in development aid. In In Hawkins, D.G., Lake, D.A., Nielson, D.L., & Tierney, M.J. (Eds.), Delegation and agency in international organizations, (pp. 41–76): Cambridge University Press.Google Scholar
- Mahn, T. (2012). The financing of development cooperation at the United Nations: Why more means less. Bonn: DIE Briefing Paper 8/2012, German Development Institute.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.
- Niskanen, W. A. (1973). Bureaucracy – servant or master?: Lessons from America. London: Institute of Economic Affairs.Google Scholar
- OECD. (2011). Multilateral aid report. organization for economic co-operation and development. Paris: DCD/DAC(2011)21/FINAL.Google Scholar
- Parízek, M. (2016). Control, soft information, and the politics of international organizations staffing. Review of International Organizations 10.1007/s11558-016-9252-1.
- Pfeffer, J., & Salancik, G. R. (1978). The external control of organizations: A resource dependence approach. New York: Harper and Row Publishers.Google Scholar
- PHRD (2012). PHRD Annual Report: Fiscal Year 2012. In The World Bank and Government of Japan. Washington D.C.: World Bank.Google Scholar
- Reinalda, B., & Verbeek, B. (Eds.) (2004). Decision making within international organisations. London: Routledge.Google Scholar
- Reinsberg, B. (2016). The implications of multi-bi financing on multilateral agencies: The example of the World Bank. In Mahn, T., Negre, M., Klingebiel, S. (Eds.) The fragmentation of aid: concepts, measurements and implications for development cooperation (185–198). Basingstoke: Palgrave McMillan.Google Scholar
- Reinsberg, B., Michaelowa, K., & Eichenauer, V. (2015). The rise of multi-bi aid and the proliferation of trust funds. In Arvin, M., Lew, B. (Eds.) Handbook on the Economics of Foreign Aid. Northampton: Edward Elgar.Google Scholar
- Reinsberg, B., Michaelowa, K., & Knack, S. (2016). Which donors, Which funds? The Choice of Multilateral Funds by Bilateral Donors at the World Bank. International Organization (forthcoming).Google Scholar
- Smyth, S. (2011). Collective action for development finance. University of Pennsylvania. Journal of International Law, 32, 961–1054.Google Scholar
- Stoiljkovic, N., & Hansen, K. (2014). Breaking Down Barriers to Sharing Knowledge. Published on Voices, http://blogs.worldbank.org/voices (Accessed July 30, 2016).
- Suchman, M. C. (1995). Managing legitimacy: Strategic and institutional approaches. Academy of Management Review, 20(3), 571–610.Google Scholar
- Thibodeau, J. (1996). The World Bank’s procurement myth. Washington D.C.: Cato Institute.Google Scholar
- Trondal, J. (2013). International bureaucracies: organizational structure and behavioural implications. In Reinalda, B. (Ed.) Routledge handbook of international organization. London: Routledge.Google Scholar
- UN (2012). Analysis of funding of operational activities for development of the United Nations system for the year 2010. Report of the Secretary General. UN Department of Economic and Social Affairs. New York.Google Scholar
- UNDG (2015). UNDG Guidance on Establishing, Managing and Closing Multi-Donor Trust Funds. Available at https://undg.org/wp-content/uploads/2015/04/MDTF-Guidance-Final-version-UNDG-approved-26.10.15.docx (Accessed August 18, 2016).
- Wapenhans, W. (1992). Effective implementation: Key to development impact: Report of the World Bank’s portfolio management task force. Washington D.C.: World Bank.Google Scholar
- Weaver, C. (2007). The World’s Bank and the bank’s world. Global Governance, 13(4), 493–512.Google Scholar
- Wilson, J. Q. (1989). Bureaucracy: What government agencies do and why they do it. New York: Basic Books.Google Scholar
- World Bank (2001). Assessment of the Strategic Compact. Available at http://www-wds.worldbank.org/servlet/WDSContentServer/WDSP/IB/2003/09/04/000012009_20030904134425/Rendered/PDF/265180Scode0901of0Strategic0Compact.pdf (Accessed January 10, 2015).
- World Bank. (2005a). 2004 Trust fund annual report. Washington, D.C.: World Bank. Available at http://documents.worldbank.org/curated/en/2005/01/5678607/world-bank-group-2004-trust-funds-annual-report-year-ended-june-30-2004 (Accessed November 1, 2015).
- World Bank (2005b). The World Bank’s Budget: Trends and Recommendations for FY06. In Strategy and Resource Management Vice Presidency. May 25. Washington D.C.: World Bank.Google Scholar
- World Bank (2007). The World Bank’s Budget: Trends and Recommendations. In Concessional Finance and Partnerships Vice Presidency. May 16. Washington D.C.: World Bank.Google Scholar
- World Bank (2012). The Matrix System at Work: An Evaluation of the World Bank’s Organizational Effectiveness. doi:10.1596/9780821397152_App-A (accessed August 4, 2016).
- World Bank (2013a). 2012 Trust Fund annual report. Concessional finance and partnerships vice presidency. Washington D.C.: World Bank.Google Scholar
- World Bank (2013b). 2013 Trust fund annual report. Concessional finance and partnerships Vice Presidency. Washington D.C.: World Bank.Google Scholar
- World Bank (2013c). Trust fund databases: Disbursements. In Concessional Finance and Partnerships Vice Presidency. Washington D.C.: World Bank.Google Scholar
- World Bank (2013d). Trust fund databases: Main trustees. In Concessional Finance and Partnerships Vice Presidency. Washington D.C.: World Bank.Google Scholar