Our argument builds on the premise that a bilateral donor’s preference for a particular type of trust fund depends on its trade-off between increased benefits from burden sharing and reduced homogeneity in preferences as the number of donors participating in a fund increases. Synergies from cooperating with other donors increase when there are more of them, but any given donor will have to compromise more on the priority (whether geographic, sectoral, thematic or other) objectives of the fund. A donor’s utility gains from participation in any particular trust fund depend on specific donor and fund characteristics. For instance, in an area with low preference homogeneity among donors, cooperation with other donors should be less attractive, implying the donor will be more likely to opt for a single-donor trust fund. Conversely, in high-risk areas such as aid to post-conflict countries, cooperation shares the risk with other donors, and the donor is more likely to opt for a large multi-donor trust fund.

We test our hypotheses using a data set on all World Bank trust funds and donors’ participation decisions over a period covering the financial years 2002-2013 (World Bank 2014b). Using Wald tests in seemingly unrelated regression estimations to compare the effect of fund and donor characteristics on the participation decisions in single-donor, multidonor, and large multi-donor trust funds, we find consistent support for our main hypotheses. Overall, results are in line with the qualitative evidence in agency reports and related case studies that served as a basis for this more general analysis.

In the following, we first provide a more detailed review of the related literature (Section 2). On this basis, Section 3 develops our theoretical argument, and Section 4 derives concrete testable hypotheses related to donor choices of different types of trust funds. Section 5 proceeds with the econometric analysis. Section 6 further discusses the findings and concludes.

# **2 Literature**

Few academic studies explicitly address multi-bi aid. In the 2000s, some articles cursorily mentioned trust funds, most notably as a means for middle-ranking powers to influence multilateral agency operations beyond their limited formal voting power (e.g., Kapur 2002; Woods 2005; Weaver 2007). Only recently have scholars begun to analyze multi-bi aid more systematically, and much of the work cited below is not yet published. Graham (2015a) traces the growing bilateralization of the United Nations development system. Her article raises concerns that multi-bi funding – the practice of earmarking voluntary contributions to multilateral agencies – undermines universal multilateralism. In addition, Graham (2015b) illustrates that variation in donor preferences over both the size and the substance of agency activity can explain macro-historical shifts in funding rules from core funding to (unearmarked) voluntary funding and earmarked funding at international organizations since the Second World War. Sridhar and Woods (2013) examine the specific case of the Global Fund to Fight Aids, Tuberculosis, and Malaria and suggest that donors channel resources through the Global Fund to influence the activities of the World Health Organization, a practice they term "Trojan multilateralism".

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