Milner, H. International Organizations
Why do countries delegate the distribution of foreign aid to international institutions? Why would governments relinquish control over their aid if they are a useful instrument of statecraft? Governments delegate aid delivery to international institutions when their publics lack information about the consequences of aid and fear that their governments will deviate from their preferences concerning its use. By using the international organization to send aid, the government issues a credible signal to domestic groups about the use of foreign aid. This signal leaves all actors better off by helping to solve a principal-agent problem in domestic politics. When publics are more skeptical about the benefits of aid, governments are more likely to turn aid over to multilateral organizations in order to reassure taxpayers that their money is being well spent. Using data on about 20 donor countries of the OECD from 1960-2000, I investigate the sources of multilateral giving, showing that public opinion has the expected negative relationship to multilateral aid-giving.