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.     

The politics of contract allocation in the World Bank

Scholarship on informal politics in multilateral aid organizations investigates all stages of the allocation process - from project identification to aid disbursement and project evaluation. Yet, one area remains almost entirely overlooked in the literature - allocation of aid-financed contracts. This article aims to address the shortcoming of the existing research and develops a theory of contract allocation in a prominent multilateral aid organization – the World Bank. The theoretical argument explores the relationship between formal procurement arrangements and recipients’ control over contract allocation, and the role of this relationship in explaining patterns of contract allocation. My empirical analyses using data on the World Bank’s contracts provide evidence of recipients’ ability to allocate contracts in favor of domestic companies, as well as bilateral aid donors.     

The Effect of Bargaining on US Economic Aid

This article is designed to explore the effect of bargaining power on the distribution of US economic aid. Conceptualizing US foreign assistance as the outcome of aid-for-policy transactions between the donor and its recipients, it shows why the bargaining issue is an integral part of US economic aid. A two-tiered stochastic frontier analysis (SFA) is then developed to integrate the bargaining effect into our empirical analysis. Applying the model to US economic aid for the period of 1976–2011, I show empirical results that strongly support the bargaining approach. The results show that the bargaining effect explains a fundamental part of the cross-recipient difference in the level of US economic aid. On average, the donor US enjoys more bargaining power. However, a huge variation in bargaining capability on the recipient side is equally noteworthy. As for the contributors to the difference, the statistical results reveal that bargaining efficiency increases with higher per capita income, ongoing civil war, violations of personal integrity rights, and a more democratic regime, on the one hand. Importing heavily from and having an active defense pact with the US, on the other hand, affect bargaining efficiency negatively.     

Aid for arms: The impact of superpower economic assistance on military spending in Sub‐Saharan Africa

This study examines the relationship between superpower economic assistance and military allocations in 25 countries of Sub‐Saharan Africa during the period 1977–1984. Using pooled time‐series regression analysis, we find that African recipients do not treat U.S. aid as fungible. Soviet economic aid, however, is found to have a positive effect on the recipient's military spending.     

Political Context and the Consequences of Naming and Shaming for Human Rights Abuse

Does being named and shamed for human rights abuse influence the amount of foreign aid received by the shamed state? Recent research suggests that the impact of public censure may depend on the political relationship between donor and recipient. We argue that donors deriving a direct political benefit from the aid relationship (such as a military advantage or the satisfaction of a domestic political audience) will ignore or work against condemnation, but donors with little political interest in the recipient (who give aid for symbolic or humanitarian reasons) will punish condemned states. We also argue that the size of prior aid packages can be used as a holistic measure of the donor’s political interest in the aid relationship because mutually beneficial aid packages are subject to a bargaining process that favors recipients with more to offer. We find that condemnation for human rights abuse by the United Nations is associated with lower bilateral aid levels among states that previously received small aid package, and with equal or higher bilateral aid to states already receiving a great deal of aid. The source of shaming also matters: We find that public shaming by human rights NGOs is not associated with decreased aggregate bilateral aid.     

Selectivity on aid modality: Determinants of budget support from multilateral donors

Since the late 1990s a selection on policy approach to aid was advocated such that more aid should be allocated to countries with good policies, but there is little evidence that this has occurred. This paper argues that donors may exercise selectivity over the aid modality. Specifically, multilateral donors will cede more recipient control over aid by granting more budget support to those recipients with better expenditure systems and spending preferences (towards the poor) aligned with the donor. We test this for European Commission and World Bank budget support over 1997?C2009 and find some support. Both donors have given budget support to almost half of the countries they give aid, and it is usually a significant share of their aid. The principal determinants of receiving budget support are having a poverty reduction strategy in place, which can be considered a good indicator of aligned preferences, and indicators of government efficiency. These variables did not, however, influence the amount of budget support given. Multilateral donors have been more likely to give budget support to countries with aligned spending preferences and better quality systems, even if they have not reallocated the total aid envelope in that way.     

Plus ça change, … : The Allocation of French ODA to Africa During and After the Cold War

France is frequently identified as the country whose official development assistance (ODA) aid program is most oriented toward the promotion of its foreign policy goals. We examine whether France reoriented the allocation of its aid in Africa to reflect changing priorities in the 1990s. Using panel data, we compare the patterns in French aid allocation to African recipients during the period 1980–1989 with that during the period 1990–2000. We find that nearly all the same political, economic, diplomatic, and cultural variables that explain French ODA allocation during the Cold War apply in the second period as well, though to a slightly lesser degree. The predictive strength of the prior years’ ODA commitments did increase in magnitude, suggesting that bureaucratic inertia increasingly exerts a formidable force in such decisions.     

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

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.     

Colonial Legacy and Foreign Aid: Decomposing the Colonial Bias

It is well-known that donors give considerably more foreign aid to former colonies than to countries lacking past colonial ties. Unfortunately, we know relatively little about why this is the case. For one, there is almost never a theoretical justification for the inclusion of colonial history in statistical models. For the other, the only explicitly made rationale by Bueno de Mesquita and Smith (2009) actually predicts an interpretational problem: colonial history not only increases a former colony’s saliency to the donor, but also has left deep marks on recipients’ social and political institutions today. Both aspects shape how much aid a donor transfers to the recipient. This leaves ambiguous the meaning of the routinely found positive, sizable, and significant coefficient of colonial history on aid flows. We solve the inferential quandary by using a decomposition approach from labor econometrics. Our results show that about 75–100% of the colony effect on foreign aid stems from the greater saliency that donors give to policy concessions from former colonies.     

Financing the peace: Evaluating World Bank post-conflict assistance programs

Does World Bank aid to countries damaged by civil conflict meet its stated goals of speeding economic recovery and reducing the risk of conflict recidivism? We contend that the Bank’s success depends on its ability to bolster and signal the credibility of politicians’ commitments to peaceful politics and tailor its programs to the post-conflict environment. In the first systematic evaluation of World Bank post-conflict assistance, we estimate selection-corrected event history models of the effect of Bank programs on recovery and recurrence using an original dataset of all World Bank programs in post-conflict environments. Among key results, we find that the Bank tends to select aid recipients according to their pre-existing probability of conflict recurrence and that, once we control for this non-random selection, the Bank has no systematic effect on either conflict recurrence or economic recovery.     

Reputation concerns in aid conditionality

This paper analyzes the conditions under which reputation concerns induce donors and recipients to respect conditional aid contracts. Donors enforce conditionality if the benefits of improving compliance in future contracts thanks to a tougher reputation exceed the costs of resisting disbursement pressure. The level of conditionality enforcement is optimal if all the costs and benefits of reputation building are internalized by the decision maker. This condition is not satisfied at the World Bank and the IMF, where enforcement is decentralized to country departments which do not internalize the benefits of a tough reputation on other departments. Recipients comply with conditionality if the costs of implementing conditionality are lower than the benefits of securing tranche release thanks to compliance and obtaining future contracts thanks to a good reputation for compliance. Reputation concerns increase recipients’ incentives to comply only if there is some uncertainty on future aid commitments, which is true for successive single-tranche contracts, but not for multi-tranche contracts.     

From Cold War to Arab Spring: mapping the effects of paradigm shifts on the nature and dynamics of US democracy assistance to the Middle East and North Africa

Since the end of the Cold War, the United States has articulated and implemented explicit strategies of democracy promotion by providing assistance to governments, political parties, and other non-governmental groups and organizations all over the world. One particularly challenging region has been the Middle East and North Africa, where democratic development and democracy aid opportunities have been limited and constrained by a variety of factors related to social, economic, and political characteristics of the region and policy priorities of the United States. This article examines the impact of two major paradigm shifts – the end of the Cold War (1989) and the 9/11 episode (2001) – on the nature, purposes, and consequences of US democracy assistance to the Middle East. Examining democracy aid allocations, social, democratic and political factors in the region, and other variables, the analysis traces the shifts in aid strategies, purposes, and recipients generated by these paradigm shifts and assesses the impact of such assistance on the politics of the region. The article concludes with a discussion of the implications of these findings for US democracy promotion policies and the impact of the Arab Spring events as a potential third break point.     

Do Sanctions Always Stigmatize? The Effects of Economic Sanctions on Foreign Aid

A prevalent view among both scholars and policymakers is that economic sanctions stigmatize and isolate their targets. According to this perspective, the stigma associated with economic sanctions should signal to foreign aid donors that they should be more cautious and restrained in providing assistance to sanctioned states. We test this signaling-based theory via a large-n analysis of the impact that sanctions imposed by the United States and those supported by the United Nations (UN) had on the aid flows of 133 recipient states from 1960–2000. Contrary to expectations, our results indicate that being subject to sanctions supported by the UN does not have a negative effect on target states’ aid flows, and being sanctioned by the United States actually has a positive effect on them. We explore two potential explanations for our puzzling findings based upon donor self-interest and donor altruism via a scoping analysis of eight sanctions cases in which target states received greater than expected aid flows. Our findings suggest that theories based upon donor self-interest represent the most promising explanation for why individual donors may increase their aid to sanctioned states.     

Indicators of identity: Ngos and the strategic imperative of assessing core values

The author argues that the distinctive values common to many NGOs give them a particular advantage over other types of organisation. This perspective should be seen in the context of donors' increasing willingness to fund non-traditional development actors, including the military, parastatals, quangos, private service contractors, and consultancy firms. To distinguish themselves from other recipients of aid funding, NGOs need to identify, articulate, and nurture their core values and identity. The paper identifies some of the key indicators that best reflect values and organisational capacities that distinguish NGOs from other agencies. The concern is that if NGOs lose their core values they lose their role.     

Aid,growth and peace: a comparative analysis

This article disaggregates aid data to enrich our understanding of the patterns of post-conflict aid. We find that the front-loading of aid after a peace agreement, detected by previous research, has not been the general pattern. To begin with, relief and aid need separating out, commitments and disbursement distinguished, and four-year averages replaced by annual figures. Detailed analysis of seven post-conflict cases confirms that the political contexts of donation and implementation, including political assessments of peace agreements, have considerable influence on aid patterns. Finally, high levels of aid and rapid economic growth are not essential preconditions for sustaining peace. More significant are the short-term stabilisation strategies adopted and the distributive effects of structural adjustment.     

The Democracy Aid Calculus: Regimes,Political Opponents,and the Allocation of US Democracy Assistance, 1981–2009

To encourage the spread of democracy throughout the developing world, the United States provides targeted aid to governments, political parties, and other non-governmental groups and organizations. This study examines the calculations behind the allocation of democracy assistance, with special attention to the role of regime conditions and policy compatibility in the provision of aid. We argue that both concerns—the opportunity for successful democratization and critical goals related to containing and countering political opponents—are central to democracy aid allocations. We theorize how these two concerns determine the amount of aid allocated, operationalizing these concepts using measures of the original democracy level, change in the democracy level, and policy compatibility. We find support for our argument in tests of US democracy aid allocations by the US Agency for International Development (USAID) from 1981–2009.     

The choice for multilateralism: Foreign aid and American foreign policy

Why do governments choose multilateralism? We examine a principal-agent model in which states trade some control over the policy for greater burden sharing. The theory generates observable hypotheses regarding the reasons for and the patterns of support and opposition to multilateralism. To focus our study, we analyze support for bilateral and multilateral foreign aid giving in the US. Using new survey data, we provide evidence about the correlates of public and elite support for multilateral engagement. We find weak support for multilateralism and deep partisan divisions. Reflecting elite discourse, public opinion divides over two competing rationales—burden sharing and control—when faced with the choice between multilateral and bilateral aid channels. As domestic groups’ preferences over aid policy diverge from those of the multilateral institution, maintaining control over aid policy becomes more salient and support for multilateralism falls.     

Towards a universal framework for democracy assessment

Assessing the state or quality of a country's democracy has become an increasingly widespread undertaking over the past ten years, whether to construct league tables of democratic attainment, to explore correlations between democracy and economic condition or performance, or to identify likely recipients and projects for international aid. This article reports on a civil society-based programme and framework for democracy assessment in which the author has been involved, whose purpose is to contribute to public debate about a country's democracy, to monitor its progress over time, and to identify pressing areas for reform. Distinctive features of the methodology are the derivation of assessment criteria from clearly articulated democratic values, its relevance to new and established democracies alike, and the comprehensiveness of the assessment framework, covering citizen rights and the rule of law, institutions of representative and accountable government, civil society and participation, and international dimensions of democracy. The article explores the intellectual underpinnings of the assessment methodology in the universal validity of democratic norms and a common imperative for democratization in developed as well as developing countries; and argues for the framework's usefulness in teaching as well as research. It concludes with a brief report on the comparative findings from pilot assessments undertaken with in-country partners in eight countries from across the world.     

Does Membership on the UN Security Council Influence Voting in the UN General Assembly?

Recent studies report that temporary members of the UN Security Council receive favorable treatment from the IMF, the World Bank, or in US foreign aid in exchange for their political support for permanent members. Nevertheless, few studies have examined whether this favorable treatment and these benefits have actually made any significant changes in the member states’ voting behavior in the United Nations. To explore this question, we investigate whether membership on the UN Security Council influences a state’s voting in the UN General Assembly. In the analysis of panel data for 197 countries over the period from 1946 to 2008, the empirical results show that elected members of the UN Security Council tend to behave similarly with permanent members, especially with the United States, as the number of loan programs signed with the IMF and the World Bank increases. Also, US foreign aid significantly increases temporary members’ vote coincidence with the United States and other permanent members. In this regard, this article contributes to our understanding of state voting behavior and power politics in international organizations.