Foreign-Aid Donors’ Allocation Preferences across Bilateral and Multilateral Channels
Abstract
This paper examines how developed countries allocate foreign aid to less developed
countries. In
giving aid, countries act on a variety of motives that have received much attention
in academic
literature. I focus on three motives: geopolitical, commercial, and humanitarian.
Once being
motivated to give aid, a donor must decide how it will do so. Broadly, the donor can
use bilateral
or multilateral channels – it can act alone or with its peers. Each method comes with
particular
costs and benefits for donors, and one channel might better serve certain motives
than another
might. The primary task of this work is to identify for which criteria major donors
exhibit strong
channel preferences.1
Donors exhibit a strong multilateral bias in allocating on democracy (humanitarian)
and capital
openness (commercial). These criteria share certain characteristics that make them
likely
candidates for multilateral channels. First, both objectives are widely shared by
major western
donors. Second, they both confer broad benefits that are difficult for donors to particularize
to
certain interest groups. Third, they are critical aspects of a country’s political
and economic
control, requiring large-scale coordinated efforts if donors hope to induce changes
in recipient
governments. By expressing these preferences through multilateral channels, donors
capitalize on
these collective action benefits multilaterals confer. Donors (aside from the United
States) also
exhibit a strong multilateral bias in supplementing US military support. Here, in
pursuing their
geopolitical interests, donors capitalize on the legitimacy benefits offered by multilateral
agencies.
By contrast, donors express strong bilateral biases with respect to former colonies
and property
rights. Colonial history is a nearly exclusive relationship among donors and recipients,
the benefits of which donors are not inclined to share with other donors. Nor should
we expect
donors to be able to solicit other donors to support them in reaping these exclusive
gains. Though
property rights confer broad-based benefits, they do not enjoy as uniformly expressed
preferences
as do capital openness and democracy. Property rights also pose much less threat to
the
autonomy of recipient governments than does democracy or capital openness, making
the need
for coordinated action less acute.
The differences in how donors use multilateral agencies for allocating aid helps to
shed light on
why they use them. Multilateral agencies offer donors legitimacy in their geopolitical
behavior
and provide valuable collective action mechanisms for pursuing common goals that have
broad
benefits and face strong opposition. These results highlight legitimacy and collective
action as
two primary benefits of multilateral aid agencies and help explain why donors employ
both
bilateral and multilateral channels in the manner and to the extent they do in giving
aid.
Type
Master's projectDepartment
The Sanford School of Public PolicyPermalink
https://hdl.handle.net/10161/3619Citation
Woollacott, Jared (2011). Foreign-Aid Donors’ Allocation Preferences across Bilateral and Multilateral Channels.
Master's project, Duke University. Retrieved from https://hdl.handle.net/10161/3619.More Info
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