Skip to main content
SpringerLink
Log in

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

  • Published:
The Review of International Organizations Aims and scope Submit manuscript

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.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

Notes

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

  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. 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. 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. 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. 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. 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. 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.

References

  • Acharya, A., De Lima, A. T. F., & Moore, M. (2006). Proliferation and fragmentation: Transactions costs and the value of aid. The Journal of Development Studies, 42(1), 1–21.

    Article  Google Scholar 

  • Aldasoro, I., Nunnenkamp, P., & Thiele, R. (2010). Less aid proliferation and more donor coordination? The wide gap between words and deeds. Journal of International Development, 22(7), 920–940.

    Article  Google Scholar 

  • Alesina, A., & Weder, B. (2002). Do corrupt governments receive less foreign aid? The American Economic Review, 92(4), 1126–1137.

    Article  Google Scholar 

  • Alvi, E., & Senbeta, A. (2012). Does foreign aid reduce poverty? Journal of International Development, 24(8), 955–976. doi:10.1002/jid.1790.

    Article  Google Scholar 

  • Annen, K., & Moers, L. (2016). Donor competition for aid impact, and aid fragmentation. The World Bank Economic Review lhw019, 1–29. doi:10.1093/wber/lhw019

  • Autesserre, S. V. (2010). The trouble with the Congo: local violence and the failure of international peacebuilding (Cambridge studies in international relations, Vol. 115). Cambridge: Cambridge University Press.

    Book  Google Scholar 

  • Bates, R. H. (1981). Markets and states in tropical Africa. Berkeley: University of California Press.

    Google Scholar 

  • Bermeo, S. B. (2010). Development and strategy: Aid allocation in an interdependent world. Durham: Duke University.

    Google Scholar 

  • Bermeo, S. B. (2011). Foreign aid and regime change: A role for donor intent. World Development, 39(11), 2021–2031. doi:10.1016/j.worlddev.2011.07.019.

    Article  Google Scholar 

  • Bermeo, S. B. (2016). Aid is not oil: Donor utility, heterogeneous aid, and the aid-democratization relationship. International Organization, 70(1), 1–32.

    Article  Google Scholar 

  • Bigsten, A., & Tengstam, S. (2015). International coordination and the effectiveness of aid. World Development, 69, 75–85. doi:10.1016/j.worlddev.2013.12.021.

    Article  Google Scholar 

  • Bourguignon, F., & Platteau, J.-P. (2015). The hard challenge of aid coordination. World Development, 69, 86–97. doi:10.1016/j.worlddev.2013.12.011.

    Article  Google Scholar 

  • Bräutigam, D. (2009). The dragon's gift: The real story of China in Africa. Oxford: Oxford University Press.

    Google Scholar 

  • Bräutigam, D. (2011). Aid ‘with Chinese characteristics’: Chinese foreign aid and development finance meet the OECD-DAC aid regime. Journal of International Development, 23(5), 752–764. doi:10.1002/jid.1798.

    Article  Google Scholar 

  • Bueno de Mesquita, B., & Smith, A. (2007). Foreign aid and policy concessions. Journal of Conflict Resolution, 51(2), 251–284. doi:10.1177/0022002706297696.

    Article  Google Scholar 

  • Bueno de Mesquita, B., & Smith, A. (2009). A political economy of aid. International Organization, 63(2), 309–340. doi:10.1017/S0020818309090109.

    Article  Google Scholar 

  • Burnside, C., & Dollar, D. (2000). Aid, policies and growth. American Economic Review, 90(4), 847–868.

    Article  Google Scholar 

  • Christensen, Z., Homer, D., & Nielson, D. L. (2011). Dodging adverse selection: How donor type and governance condition Aid’s effects on school enrollment. World Development, 39(11), 2044–2053. doi:10.1016/j.worlddev.2011.07.018.

    Article  Google Scholar 

  • Dietrich, S. (2016). Donor political economies and the pursuit of aid effectiveness. International Organization, 70(1), 65–102.

    Article  Google Scholar 

  • Djankov, S., Montalvo, J. G., & Reynal-Querol, M. (2009). Aid with multiple personalities. Journal of Comparative Economics, 37(2), 217–229.

    Article  Google Scholar 

  • Dreher, A., & Fuchs, A. (2015). Rogue aid? An empirical analysis of China's aid allocation. Canadian Journal of Economics/Revue canadienne d'économique, 48(3), 988–1023.

    Article  Google Scholar 

  • Dreher, A., & Sturm, J.-E. (2012). Do the IMF and the World Bank influence voting in the UN General Assembly? Public Choice, 151(1–2), 363–397.

  • Dreher, A., Sturm, J.-E., & Vreeland, J. R. (2009). Development aid and international politics: Does membership on the UN Security Council influence World Bank decisions? Journal of Development Economics, 88(1), 1–18.

  • Dreher, A., Fuchs, A., Hodler, R., Parks, B., Raschky, P. A., & Tierney, M. J. (2015). Aid on Demand: African Leaders and the Geography of China's Foreign Assistance. CESifo Working Paper No. 5439. Munich: Center for Economic Studies, Ifo Institute.

    Google Scholar 

  • Dreher, A., Fuchs, A., Hodler, R., Parks, B., Raschky, P. A., & Tierney, M. J. (2016). Aid on demand: African leaders and the geography of China's foreign assistance. AidData working paper #3 revised. Williamsburg: AidData.

    Google Scholar 

  • Easterly, W. (2007). Are aid agencies improving? Economic Policy, 22(52), 633–678. doi:10.1111/j.1468-0327.2007.00187.x.

    Article  Google Scholar 

  • Easterly, W., & Pfutze, T. (2008). Where does the money go? Best and worst practices in foreign aid. Journal of Economic Perspectives, 22(2), 29–52.

    Article  Google Scholar 

  • Easterly, W., & Williamson, C. R. (2011). Rhetoric versus reality: The best and worst of aid agency practices. World Development, 39(11), 1930–1949. doi:10.1016/j.worlddev.2011.07.027.

    Article  Google Scholar 

  • Findley, M. G., Harris, A., Milner, H., & Nielson, D. L. (2016). Who Controls Foreign Aid? Elite versus Public Perceptions of ​Donor Influence in Aid-Dependent Uganda. International Organization.

  • Frey, B. S., & Schneider, F. (1986). Competing models of international lending activity. Journal of Development Economics, 20(2), 225–245. doi:10.1016/0304-3878(86)90022-2.

    Article  Google Scholar 

  • Frot, E., & Santiso, J. (2009). Crushed aid: Fragmentation in Sectoral aid. SITE Working Paper No. 6, 2009.

  • Fuchs, A., Nunnenkamp, P., & Öhler, H. (2015). Why donors of foreign aid do not coordinate: The role of competition for export markets and political support. The World Economy, 38(2), 255–285.

    Article  Google Scholar 

  • Gartzke, E., & Naoi, M. (2011). Multilateralism and democracy: A dissent regarding Keohane, Macedo, and Moravcsik. International Organization, 65(03), 589–598.

    Article  Google Scholar 

  • Gerber, A. S., & Green, D. P. (2012). Field experiments: Design, analysis, and interpretation. New York: W.W. Norton.

  • Girod, D. M. (2008). Cut from the Same Cloth? Multilateral vs. Bilateral Aid. Paper presented at the Annual Conference of International Political Economy Society, Philadelphia, November 2008.

  • Green, E. D. (2010). Patronage, district creation, and reform in Uganda. Studies in Comparative International Development (SCID), 45(1), 83–103. doi:10.1007/s12116-009-9058-8.

    Article  Google Scholar 

  • Headey, D. (2008). Geopolitics and the effect of foreign aid on economic growth: 1970–2001. Journal of International Development, 20(2), 161–180. doi:10.1002/jid.1395.

    Article  Google Scholar 

  • Isaksson, A.-S., & Kotsadam, A. (2016). Chinese aid and local corruption. In AidData working paper #33. Williamsburg: AidData.

    Google Scholar 

  • Jablonski, R. S. (2014). How aid targets votes: The impact of electoral incentives on foreign aid distribution. World Politics, 66(2), 293–330.

    Article  Google Scholar 

  • Kilby, C. (2006). Donor influence in multilateral development banks: The case of the Asian Development Bank. The Review of International Organizations, 1(2), 173–195. doi:10.1007/s11558-006-8343-9.

    Article  Google Scholar 

  • Kilby, C. (2013). The political economy of project preparation: An empirical analysis of World Bank projects. Journal of Development Economics, 105(0), 211–225. doi:10.1016/j.jdeveco.2013.07.011.

    Article  Google Scholar 

  • Kilby, C., & Dreher, A. (2010). The impact of aid on growth revisited: Do donor motives matter? Economics Letters, 107(3), 338–340. doi:10.1016/j.econlet.2010.02.015.

    Article  Google Scholar 

  • Kiwanuka, M. (2012). Priorities for Renewed Economic Growth & Development. Budget Address delivered by the Minister of Finance, Planning & Economic Development Delivered at the Meeting of the 2nd Session of the 9th Parliament of Uganda.

  • Kizhakethalackal, E. T., Mukherjee, D., & Alvi, E. (2013). Quantile regression analysis of health-aid and infant mortality: a note. Applied Economics Letters, 20(13), 1197–1201. doi:10.1080/13504851.2013.799744.

    Article  Google Scholar 

  • Knack, S., & Rahman, A. (2007). Donor fragmentation and bureaucratic quality in aid recipients. Journal of Development Economics, 83(1), 176–197.

    Article  Google Scholar 

  • Knack, S., & Smets, L. (2013). Aid tying and donor fragmentation. World Development, 44(0), 63–76. doi:10.1016/j.worlddev.2012.09.006.

    Article  Google Scholar 

  • Lyne, M. M., Nielson, D. L., & Tierney, M. J. (2006). Who delegates? Alternative models of principles in development aid. In D. G. Hawkins, D. A. Lake, D. L. Nielson, & M. J. Tierney (Eds.), Delegation and Agency in International Organizations (pp. 41–76). New York: Cambridge University Press.

    Chapter  Google Scholar 

  • Lyne, M. M., Nielson, D. L., & Tierney, M. J. (2009). Controlling coalitions: Social lending at the multilateral development banks. The Review of International Organizations, 4(4), 407–433.

    Article  Google Scholar 

  • Maizels, A., & Nissanke, M. K. (1984). Motivations for aid to developing countries. World Development, 12(9), 879–900. doi:10.1016/0305-750x(84)90046-9.

    Article  Google Scholar 

  • Martens, B., Mummert, U., Murrell, P., Seabright, P., & Ostrom, E. (2002). The institutional economics of foreign aid. Cambridge: Cambridge University Press.

    Book  Google Scholar 

  • Milner, H. V. (2006). Why multilateralism? Foreign aid and domestic principal-agent problems. In D. G. Hawkins, D. A. Lake, D. L. Nielson, & M. J. Tierney (Eds.), Delegation and Agency in International Organizations (pp. 107–139). New York: Cambridge University Press.

    Chapter  Google Scholar 

  • Milner, H. V., Nielson, D. L., & Findley, M. G. (2016). Citizen preferences and public goods: comparing preferences for foreign aid and government programs in Uganda. The Review of International Organizations, 11(2), 219–245. doi:10.1007/s11558-016-9243-2

  • Minoiu, C., & Reddy, S. G. (2007). Aid does matter, after all: Revisiting the relationship between aid and growth. Challenge, 50(2), 39–58. doi:10.2753/0577-5132500203.

    Article  Google Scholar 

  • Minoiu, C., & Reddy, S. G. (2010). Development aid and economic growth: A positive long-run relation. The Quarterly Review of Economics and Finance, 50(1), 27–39. doi:10.1016/j.qref.2009.10.004.

    Article  Google Scholar 

  • Morrison, K. M. (2009). Oil, nontax revenue, and the Redistributional foundations of regime stability. International Organization, 63(1), 107–138. doi:10.1017/S0020818309090043.

    Article  Google Scholar 

  • Neumayer, E. (2003). The determinants of aid allocation by regional multilateral development banks and United Nations agencies. International Studies Quarterly, 47(1), 101–122.

    Article  Google Scholar 

  • Nunnenkamp, P., Rank, M., & Thiele, R. (2015). Aid fragmentation and donor coordination in Uganda: A district-level analysis. Kiel: Kiel Institute for the World Economy (IfW).

    Google Scholar 

  • Parks, B. C., Masaki, T., Faust, J., Leiderer, S. (2016). Aid management, trust, and development policy influence: New evidence from a survey of public sector officials in low-income and middle-income countries. AidData Working Paper #30. Williamsburg, VA: AidData.

  • Pepinsky, T. B. (2008). Capital mobility and coalitional politics: Authoritarian regimes and economic adjustment in Southeast Asia. World Politics, 60(3), 438–474.

    Article  Google Scholar 

  • Ram, R. (2003). Roles of bilateral and multilateral aid in economic growth of developing countries. Kyklos, 56(1), 95–110. doi:10.1111/1467-6435.00211.

    Article  Google Scholar 

  • Ram, R. (2004). Recipient country's ‘policies’ and the effect of foreign aid on economic growth in developing countries: Additional evidence. Journal of International Development, 16(2), 201–211. doi:10.1002/jid.1071.

    Article  Google Scholar 

  • Rodrik, D. (1996). Why is there multilateral lending? In M. Bruno & B. Pleskovic (Eds.), Annual World Bank conference on development economics, 1995 (pp. 167–193). Washington, DC: International Monetary Fund.

    Google Scholar 

  • Seiler, N., & Madir, J. (2012). Fight against corruption: Sanctions regimes of multilateral development banks. Journal of International Economic Law, 15(1), 5–28. doi:10.1093/jiel/jgr037.

    Article  Google Scholar 

  • Steinwand, M. C. (2015). Compete or coordinate? Aid fragmentation and lead Donorship. International Organization, 69(02), 443–472. doi:10.1017/S0020818314000381.

    Article  Google Scholar 

  • Stone, R. W. (2002). Lending credibility: The International Monetary Fund and the post-communist transition. Princeton: Princeton University Press.

    Book  Google Scholar 

  • Stone, R. W. (2004). The political economy of IMF lending in Africa. American Political Science Review, 98(4), 577–591.

    Article  Google Scholar 

  • Strange, A. M., Dreher, A., Fuchs, A., Parks, B., & Tierney, M. J. (2015). Tracking underreported financial Flows: China’s Development Finance and the Aid–Conflict Nexus Revisited. Journal of Conflict Resolution. doi:10.1177/0022002715604363.

    Google Scholar 

  • Tierney, M. J., Nielson, D. L., Hawkins, D. G., Roberts, J. T., Findley, M. G., Powers, R. M., et al. (2011). More dollars than sense: Refining our knowledge of development finance using AidData. World Development, 39(11), 1891–1906. doi:10.1016/j.worlddev.2011.07.029.

    Article  Google Scholar 

  • Tsoutsoplides, C. (1991). The determinants of the geographical allocation of EC aid to the developing countries. Applied Economics, 23(4A), 647–658.

    Article  Google Scholar 

Download references

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.

Author information

Authors and Affiliations

  1. Department of Government, University of Texas at Austin, 3.108 BATTS Hall, Austin, TX, 78712, USA

    Michael G. Findley

  2. Department of Politics, Princeton University, 431 Robertson Hall, Princeton, NJ, 08544, USA

    Helen V. Milner

  3. Department of Political Science, Brigham Young University, 745 SWKT, Provo, UT, 84602, USA

    Daniel L. Nielson

Authors
  1. Michael G. Findley
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Helen V. Milner
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Daniel L. Nielson
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Michael G. Findley.

Additional information

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.

Electronic supplementary material

ESM 1

(ZIP 105 kb)

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

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). https://doi.org/10.1007/s11558-017-9275-2

Download citation

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s11558-017-9275-2

Keywords

JEL classifications

Search

Navigation