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Aid has been for decades an important source of financing for developing countries, but more recently remittance flows have increased rapidly and are beginning to dwarf aid flows. This paper investigates how remittances affect aid flows, and how this relationship varies depending on the channel of transmission from remittances to aid. Buoyant remittances could reduce aid needs when human capital improves and private investment takes off. Absent these, aid flows could still drop as remittances may dampen donors' incentive to scale up aid. Concurrently, remittances could be positively associated with aid if migrants can influence aid policy in donor countries. Using an instrumental variable approach with panel data for a sample of developing countries from 1975-2005, the baseline results show that remittances actually increase aid dependency. However, a refined model controlling for the channels of transmission from remittances to aid reveals that remittances lead to lower aid dependency when they are invested in human and physical capital rather than consumed.

Economic assistance--Econometric models. --- Emigrant remittances--Econometric models. --- Developing countries. --- Exports and Imports --- Labor --- Foreign Aid --- Remittances --- Economic Development: General --- Human Capital --- Skills --- Occupational Choice --- Labor Productivity --- International economics --- Labour --- income economics --- Foreign aid --- Human capital --- Aid flows --- Bilateral aid --- Balance of payments --- International finance --- International relief --- Economic assistance --- United States --- Economic assistance. --- Emigrant remittances. --- Income economics

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Some multilateral agencies implement aid projects in a broad range of sectors, with aid disbursements showing a strong overlap with those of bilateral donors. The question then arises of why do bilateral donors delegate sizable shares of their aid to non-specialized agencies for implementation? This paper develops a game theoretic model to explain this puzzle. Donors delegate aid implementation to the multilateral agency (ML) to strengthen the policy selectivity of aid, incentivizing policy improvements in recipient countries, in turn improving aid's development effectiveness. Bilateral donors are better off delegating aid to ML even when they are purely altruistic but disagree on how aid should be distributed across recipients. Key for our result to hold is that ML searches some middle ground among disagreeing donors. Aid selectivity-in terms of both policy and poverty-emerges endogenously and is credible, as it is the solution to ML's optimization problem. Moreover, the model shows that if one sufficiently large donor is policy selective in its aid allocations, there is no need for other donors to be policy selective. The World Bank's aid program for lower-income countries, the International Development Administration (IDA), is shown to fit the assumptions and predictions of the model. Specifically, IDA is a dominant donor in most of its recipient countries and is much more policy and poverty selective than bilateral aid. Donors view it as a public good, and contribution more to it when bilateral aid is less selective. Potential threats to IDA's role as a dominant, policy-selective donor include the emergence of nontraditional donors, changes in voting shares, and traditional donors' increasing use of earmarked contributions.

Access --- Aid allocation --- Aid conditionality --- Bilateral aid --- Bilateral donor --- Bilateral donors --- Coastal & marine environment --- Collusion --- Competitors --- Cooperative --- Development administration --- Development agencies --- Development aid --- Development assistance --- Development banks --- Development economics & aid effectiveness --- Development policy --- Development research --- Dis --- Disability --- Domestic resources --- Donors --- Economic growth --- Education --- Environment --- Equality --- Finance and financial sector development --- Gender --- Gender & health --- Grants --- Humanitarian aid --- Inclusion --- Industrial countries --- International development --- Loan --- Loans --- Macroeconomics and economic growth --- Markets --- Middle-income countries --- Mineral resources --- Multilateral development banks --- Participation --- Priorities --- Shareholders --- Social protections and labor --- Society

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There are significant weaknesses in some of the traditional justifications for assuming that aid will foster development. This paper looks at what the cross-country aid effectiveness literature and World Bank Operations Evaluation Department reviews have suggested about effective aid, first in terms of promoting income growth, and then for promoting other goals. This review forms the basis for a discussion of recommendations to improve aid effectiveness and a discussion of effective aid allocation. Given the multiple potential objectives for aid, there is no one right answer. However, it appears that there are a number of reforms to aid practices and distribution that might help to deliver a more significant return to aid resources. We should provide aid where institutions are already strong, where they can be strengthened with the help of donor resources, or where they can be bypassed with limited damage to existing institutional capacity. The importance of institutions to aid outcomes, as well as the fungibility of aid flows, suggests that programmatic aid should be expanded in countries with strong institutions, while project aid should be supported based on its ability to transfer knowledge and test new practices and support global public good provision rather than (merely) as a tool of financial resource transfer. The importance of institutions also suggests that we should be cautious in our expectations regarding the results of increased aid flows.

Aid --- Aid Allocation --- Aid Dependency --- Aid Flows --- Banks and Banking Reform --- Bilateral Aid --- Debt Markets --- Development --- Development Economics and Aid Effectiveness --- Development Goals --- Development Impact --- Development Issues --- Development Policy --- Disability --- Economic Growth --- Economic Theory and Research --- Education --- Finance and Financial Sector Development --- Financial Literacy --- GAP --- GAPs --- Gender --- Gender and Health --- Health, Nutrition and Population --- Institution Building --- Macroeconomics and Economic Growth --- Objectives --- Overseas Development Assistance --- Population Policies --- Poverty Reduction --- Pro-Poor Growth --- Projects --- School Health --- Social Protections and Labor --- Technical Assistance --- Technical Assistance Loans --- Technical Assistance Projects

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The rapid growth of trust funds at multilateral development organizations has been widely neglected in the academic literature so far. Using a simple illustrative model, this paper examines the choice by sovereign donors among various trust fund options. The authors contend that the choice among the different trust funds involves a fundamental trade-off: larger funds provide donors with the benefit of burden sharing. Conversely, each donor can better assert its individual preferences in a fund with fewer other donors. The theoretical considerations yield testable implications on a range of factors affecting this fundamental tradeoff, most notably the area of intervention of the trust fund and competing domestic interests of donor countries. Using a sample of World Bank trust funds, the paper examines the participation decisions of Organisation for Economic Co-operation and Development/Development Assistance Committee donors over the past decade. In line with the theoretical argument, preference homogeneity among donors as well as indicators for global activities and fragile states assistance are robust determinants of participation in (large) multi-donor funds. In contrast, donors tend to prefer single-donor trust funds in areas in which their national interests dominate. Although they could use bilateral aid for the same purpose, they often prefer to channel their contributions through trust funds at multilateral agencies. Donors thereby reduce their own administrative costs, while benefiting from the expertise of the multilateral agency. These findings confirm prior qualitative case studies and evidence from donor reports, suggesting that reduced reliance on single-donor trust funds-a costly instrument from the perspective of multilateral agencies-can improve the development effectiveness of aid.

Accountability --- Accounting --- Administrative costs --- Agreements --- Aid --- Aid financing --- Aid institutions --- Aids --- Allocation decisions --- Bank --- Banks and banking reform --- Bilateral agencies --- Bilateral aid --- Bilateral donor --- Bilateral donors --- Climate change --- Coastal & marine environment --- Compromise --- Conflict --- Conflict and development --- Conflict resolution --- Constraint --- Corporate law --- Developed country --- Development assistance --- Development banks --- Diseases --- Divergences --- Donor --- Donor countries --- Donor country finance and financial sector development --- Donors --- Economy --- Employment --- Environment post conflict reconstruction --- Expert --- Food security --- Foreign aid --- Foreign policies --- Foreign policy --- Foundations --- Gender --- Gender & health --- Governance --- Governance arrangements --- Government --- Health services --- IFC --- IMF --- Interest --- International affairs --- International bank --- International community --- International development --- International negotiation --- International studies --- International trade --- Investment --- Law and development --- Lead --- Leads --- Lending --- Member states --- MIC --- MICs --- Middle-income countries --- Middle-income country --- Multilateral agencies --- Multilateral aid --- Multilateral development banks --- Nation --- Partner countries --- Partnership --- Partnerships --- Peace --- Portfolio --- Privatization --- Probability models --- Public services --- Reconstruction --- Resource mobilization --- Risk --- SI --- States --- Tactics --- Taxation --- Technical assistance --- Terrorism --- Transaction costs --- Trust --- Trust funds --- UNDP --- Union --- United nations system --- University --- Value --- Voluntary contributions --- World development