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Foreign Aid Concentration and Natural Disasters

Author

Listed:
  • Subhani Keerthiratne

    (Central Bank of Sri Lanka, Colombo)

  • Richard S.J. Tol

    (Department of Economics, University of Sussex
    Department of Spatial Economics, Vrije Universiteit, Amsterdam
    Institute for Environmental Studies, Vrije Universiteit, Amsterdam
    Tinbergen Institute, Amsterdam)

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.

Suggested Citation

  • Subhani Keerthiratne & Richard S.J. Tol, 2018. "Foreign Aid Concentration and Natural Disasters," Working Paper Series 0218, Department of Economics, University of Sussex Business School.
    • Handle: RePEc:sus:susewp:0218
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    References listed on IDEAS

    as
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    7. Gehring, Kai & Michaelowa, Katharina & Dreher, Axel & Spörri, Franziska, 2017. "Aid Fragmentation and Effectiveness: What Do We Really Know?," World Development, Elsevier, vol. 99(C), pages 320-334.
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    More about this item

    Keywords

    natural disasters; foreign aid;

    JEL classification:

    • F35 - International Economics - - International Finance - - - Foreign Aid
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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