# **4. Data**

Our dependent variable is (logged) disbursements of trust funds to recipient countries based on the financial accounting tables of the World Bank.<sup>13</sup> In the disbursements data, recipient countries are almost always indicated but donors are unknown, so that we cannot discriminate between the sources of funds.<sup>14</sup> The unit of analysis thus is the recipient country‐year, rather than donor‐ recipient‐year. For purposes of comparing the overall aid selectivity of World Bank trust funds to IDA and to other bilateral aid, this is the appropriate unit of analysis, because it implicitly weights larger trust fund donors more heavily in the analysis. With donor‐recipient‐year observations, each donor‐recipient pair would receive an equal weight. If selectivity of trust fund aid differed systematically for large and small donors, selectivity coefficients could be a misleading indicator of overall selectivity.<sup>15</sup> The structure of the disbursements data is depicted in Figure 2. The figure indicates that trust funds may differ along three dimensions: by the number of contributors (Figure 3), the country‐ specific, regional or global mandate, and by their execution type (Figure 4). We analyze a subset of the universe of World Bank funds, IBRD/IDA trust funds, which are most numerous. The Bank makes a technical distinction among three types of trust funds. The Bank only provides financial services to Financial Intermediary Funds (FIFs).<sup>16</sup> The number of trust funds of the International Finance Corporation (IFC) is relatively minor and has different objectives than IBRD/IDA trust funds. IBRD/IDA trust funds, the focus of this analysis, are classified further by recipient‐executed trust funds (RETFs), which are implemented by a third party but supervised by the Bank, and Bank‐ executed trust funds (BETFs), which support the Bank’s work directly. While RETFs are similar to the IDA or IBRD in terms of being disbursed to recipient countries, BETFs are more similar to Bank administrative expenses, and often but not always finance Bank activities that are not country‐ specific and thus not relevant for our research question (Figure 4).

In testing for poverty‐ and policy‐selectivity of trust funds and other aid, we control for the natural logarithm of population. The IDA allocation formula provides more aid to larger countries, but with an elasticity of less than one. Studies typically show a “small country bias” for IDA disbursements – i.e., aid increases less than proportionately with population – but this bias is smaller than for aid from most other donors (e.g., Annen and Knack 2015).

Due to missing and low‐quality data on actual poverty rates (e.g., the percentage share of the population living on less than $2 per day), income per capita is used as a proxy for poverty in the IDA formula. In the tests we report below we follow the IDA allocation formula specifically by using

> 13 We use the data from Reinsberg et al. (2015) as obtained from the Bank’s CFGP.

> 14 The by far most important contributors to trust funds are DAC countries, accounting for 80 percent of contributions over the period of study.  Non‐DAC donor countries, private companies, NGOs and multilateral organizations are relatively minor contributors (see also Eichenauer 2015).

> 15 In Wagner (2016), CPIA ratings are significant in regressions based on recipient ‐year observations, but not in regressions based on donor‐recipient‐year observations.

> 16 Our data set does not contain the information on country allocation by FIFs, which have their own governance and disbursement systems (see Reinsberg et al. (2015).

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