Document / Publication
Policy research working paper 4952:
This paper discusses the impact of foreign aid on the recipient country's preparedness against 'natural' disasters. The theoretical model shows that foreign aid can have two opposing effects on a country's level of mitigating activities. In order to test the theoretical propositions, the authors analyze the effect of foreign aid dependence on ex-ante risk-management activity proxied by the death toll from major storms, floods and earthquakes occurring worldwide between 1980 and 2002. They find evidence that the crowding-out effect of foreign aid outweighs the preventive effect in the case of storms, while there is mixed evidence in the case of floods and earthquakes.