Portfolio Similarity and International Development Aid

How do governments distribute their foreign aid resources across international development organizations (IDO)? We argue that governments’ distributional choices across IDOs derive from their attempt to minimize the costs of delegation and to pursue their own interests in foreign aid policy. Governments make decisions about the allocation of resources across a large number of IDOs, and they delegate their scarce aid resources to IDOs that pursue development policies in line with their own foreign development interests. We use data on the financial contributions of 22 OECD governments to 12 IDOs from 1970 to 2008 to test our argument. We find strong support for our claims. Governments regularly contribute to a large number of IDOs, and they tend to delegate more resources to IDOs that provide higher levels of portfolio similarity. The findings suggest that governments can benefit from the increasing complexity of the system of international organizations. It allows them to minimize the loss of control they experience when delegating sovereignty to international organizations.