year‐specific shocks. Because motives are likely to vary with the type of trust funds (Reinsberg et al. 2015), we consider single‐donor and recipient‐executed trust funds separately, as types where an individual donor has the greatest control over where and how the funds are used. We also run separate tests for three sectors in which trust funds are relatively popular with donors – health, education, and environment ‐ and where the CPIA includes measures of the quality of sectoral policies.

Several studies (e.g., Annen and Knack 2015; Dollar and Levin 2006) have shown that IDA disbursements are highly responsive to per capita income and to the quality of policies, as intended by the IDA performance‐based allocation system. Specifically, they show that disbursements increase with the quality of policy controlling for per capita income (and population), and that they decrease with per capita income, controlling for the quality of policy (and population). Aid from some bilateral donors is also very poverty‐ and/or policy‐selective, but bilateral aid overall is much less selective than multilateral aid, and IDA is more selective than aid from most other multilaterals (Knack et al. 2011; Dollar and Levin 2006). Although multilaterals’ allocations are sometimes influenced by influential donor countries’ political or economic interests (e.g., Barro and Lee 2005; Kuziemko and Werker 2006; Dreher et al. 2009a, b), those interests matter much more for bilateral aid allocations (e.g., Alesina and Dollar 2000). Both multilateral and bilateral donors’ aid allocations have become more selective with respect to the quality of the institutional environment in recipient countries since the end of the Cold War (Dollar and Levin 2006, Claessens et al. 2009).

Very few analyses have been done of the selectivity of World Bank trust funds. World Bank (2007) reported that “the distribution of IDA disbursements” among IDA‐eligible countries does not follow a discernible performance‐based or needs‐based pattern. In fact, it found a negative correlation with CPIA ratings. However, that report did not explain its methodology: e.g., it is not clear whether it controlled for per capita income in testing the relationship of trust fund disbursements with CPIA ratings. A few years later, another World Bank study (Huq 2010) reported a positive but not very strong unconditional correlation between commitments per capita from recipient‐executed trust funds (RETF) and the CPIA ratings, which assess recipients’ policy performance and institutional capacity. An evaluation of the World Bank’s implementation of its 2007 Governance and Anti‐Corruption Strategy reports a positive coefficient on the CPIA rating in RETF allocation regressions, using aggregate GNI rather than GNI per capita. However, this positive coefficient is insignificant for RETF disbursements and only marginally significant for RETF commitments (IEG 2011b: 154). When the sample is limited to IDA‐eligible countries, CPIA is not significant even for RETF commitments. The analysis is limited to the years 2004‐2010, and it uses only one of the four “clusters” (on public sector management and institutions) of policy areas in the CPIA. Wagner (2016: 19) finds that RETF commitments for IDA‐eligible countries during the 2009‐ 2013 period are significantly correlated with GNI per capita, population, and CPIA ratings. He stresses, however, that the collective explanatory power of these three variables is much lower for RETF allocations than for IDA allocations, suggesting that “trust funds are mainly allocated according to a different set of criteria.” 6