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Natural Hazards, UnNatural Disasters: The Economics of Effective Prevention

Several studies have examined the determinants and efficacy of foreign aid in general, but few examine post-disaster aid specifically. Some theoretical models suggest that ex-post aid reduces ex-ante prevention (Raschky and Weck-Hannemann 2007 and Cohen and Werker 2008). In a background paper for this report, Raschky and Schwindt (2009a) empirically examine this link and find weak evidence that increases in the level of past foreign aid imply higher death tolls resulting from disasters. They construct a model where aid flows could increase collective prevention but predictable ex-post relief could reduce it. They then examine empirically which effect dominates by regressing mortality in 1,763 disasters (divided into three subsamples for storms, floods, and earthquakes) on aid inflow the previous year, controlling for the effects of other factors (hazard exposure, population size, institutional quality, colonial past). The statistically significant positive coefficient of the main variable of interest, humanitarian aid per capita, implies that more aid in the past is associated with additional deaths from storms. But the results for floods and earthquakes are not significant. There is no apparent reason why the storm results are statistically significant but the flood and earthquake results are not. More research is needed to understand this divergence, and the results need to be interpreted with caution. In a companion background paper, Raschky and Schwindt (2009b) extend their first study by considering the type and channel of aid. A donor could provide bilateral aid or contribute to multilateral assistance, and could do so in cash or in kind. They examine aid after 228 disasters over eight years (2000–2007). Oil and trade access are two major motives of aid (despite the humanitarian label) that are distinguished. They find that the number of people affected, but not the number of fatalities, are related to the choice between bilateral and multilateral aid. More distant countries get aid multilaterally while those with a higher fraction of fuel exports and better governance indicators get more bilateral aid, perhaps because giving directly bolsters the donor’s influence. Multilateral aid may be distributed on a “needs” basis and so the recipient’s income, governance indicators— and fatalities—may matter. Bilateral donors also favor more open recipient countries, so a larger fraction of fuel exports makes aid more likely. These findings echo those of Fink and Redaelli (2009), who analyzed 400 recent disasters and found that while needs influence relief aid, so do geographic proximity, cultural and colonial connections, and oil exports. The findings suggest that donor self-interest matters (Olsen, Carstensen, and Hoyen 2003).11 Some observers have noted the disincentives of donor programs. For example Nicaragua declined to pursue a weather indexing program after it had been priced in the global reinsurance market: it cited international assistance following Hurricane Mitch in 1998 as an indication of dependable alternatives (Alderman 2010). It may be unfair, though, to blame countries for neglecting prevention: Mozambique, anticipating major floods in 2002, asked donors for

Profile for World Bank Group Publications

Natural Hazards, UnNatural Disasters: The Economics of Effective Prevention  

Earthquakes, droughts, floods, and storms are natural hazards, but unnatural disasters are the deaths and damages that result from human act...

Natural Hazards, UnNatural Disasters: The Economics of Effective Prevention  

Earthquakes, droughts, floods, and storms are natural hazards, but unnatural disasters are the deaths and damages that result from human act...

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