Foreign Aid Concentration and Natural Disasters

Subhani Keerthiratne () and Richard Tol
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Subhani Keerthiratne: Central Bank of Sri Lanka, Colombo

Working Paper Series from Department of Economics, University of Sussex Business School

Abstract: We examine the impact of natural disasters on the concentration of development aid, using country-level panel data. Employed disaster indices are purely based on physical intensities of disasters, thus overcome the common issue of endogeneity in natural disaster data. Countries receive more disaster-related foreign aid in the aftermath of natural catastrophes. Beyond that, natural disasters lead to a diversification of types of aid received and a diversification of the number of donors. This is true in the immediate aftermath of the disaster, and continues long after. Our findings are robust to additional controls, alternative estimators, measures and data. The literature on the fragmentation of aid shows that, typically, aid is less effective in promoting economic development when it comes from many sources and is spread over many programmes. The paper thus shows that, besides the negative effect on economic growth, natural disasters also have a negative impact on development aid.

Keywords: natural disasters; foreign aid (search for similar items in EconPapers)
JEL-codes: F35 Q54 (search for similar items in EconPapers)
Date: 2018-01
New Economics Papers: this item is included in nep-dev and nep-env
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Persistent link: https://EconPapers.repec.org/RePEc:sus:susewp:0218

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