Two Parties - Less Cake? Divided Government and Multilateral Aid

Abstract

This paper investigates the effect of divided government on the share of official development assistance (ODA) that is given multilaterally. It uses intra-governmental fragmentation to capture divided government in parliamentary systems, developing two rival hypotheses with respect to the effect of divided government on the share multilateral aid. On the one hand, the share of multilateral aid may increase as cabinet parties seek to overcome gridlock through delegation. On the other hand, increased fragmentation may incite cabinet parties to revoke delegated authority and to conclude inefficient logrolls in bilateral aid. The paper subsequently assesses these hypotheses using a dataset with twenty OECD donors from 1960 to 2002. Empirical results show that intra-governmental fragmentation decreases the share of multilateral aid. The findings hold for alternative specifications of the predictor, various econometric specifications, and estimation methods. As to the causal mechanism, divided government does not generate gridlock, but incites cabinet parties to inflate the bilateral aid portfolio, which explains the relative decline in multilateral aid. These results imply that domestic politics and specific institutional settings that involve shared decision-making authority in the executive deserve more thorough attention by students of foreign policy outcomes.