these topics may be contentious not only among World Bank members as a whole, but also among donors. The contentious issue variable may then be acting as, in effect, a second indicator of preference heterogeneity among donors, supplementing the main indicator that is based on bilateral sector allocations.

Our main findings from regressions with the smaller set of control variables are highly robust to including this larger set of controls. They are also unaffected by using different estimation techniques. In another robustness check, we performed conditional logit estimations, to account for the binary nature of the dependent variable. In these tests, the direction and significance of all effects of interest were virtually unaffected.<sup>15</sup>

# **6 Conclusion**

Existing studies of donors’ institutional choices focus on their allocations between bilateral and multilateral aid, or their allocations among multilateral agencies. This paper analyzes the multiple choices between bilateral and multilateral aid. These choices matter in terms of both aid volumes and numbers of funds, which have increased dramatically since the early 1990s. For bilateral donors, trust funds can combine some of the advantages of the two conventional types of aid. Donors retain more control than with contributions to core multilateral funds such as IDA, particularly in the case of SDTFs. On the other hand, trust funds carry some of the burden sharing benefits of participation in multilaterals, particularly for larger MDTFs.

In an illustrative theoretical model, we show the individual donor choices under different external conditions regarding the (thematic and geographic) area of intervention, and the economic situation in the donor country. Based on a seemingly unrelated regression analysis of the World Bank’s trust fund database over the last decade, we find that preference homogeneity among donors, as well as indicators for global activities and fragile states assistance (all cases where burden sharing is important) increase the donor’s willingness to opt for (large) MDTFs. In contrast, donors tend to prefer SDTFs when and where their national (e.g., commercial) preferences tend to predominate (e.g., aid to MICs, and when unemployment rates are increasing). While they could use bilateral aid for the same purpose, channeling funds through multilateral agencies lets them benefit from the agency’s expertise and reduce administrative cost, particularly in areas where their own capacity is limited. While our rough proxies for donor capacity generally were not significant in our tests, capacity (along with other donor-specific effects) differences are controlled for by the donor fixed effects included in some of our specifications.

Certain trends suggest that donors’ reliance on trust funds may continue to increase. These trends include the growing importance of climate change and other global public goods issues, and budget-related capacity reductions in bilateral aid agencies. Reforms in the IFIs that gradually reduce the vote shares of developed country donor governments may increase conflict in the IFIs’ formal decision-making bodies, and hence increase the case for

> 15 Results can be obtained from the authors upon request.

22