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Natural disasters, mitigation investment and financial aid

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  • Andergassen, Rainer
  • Sereno, Luigi

Abstract

We consider firms facing the risk of natural disasters and study their problem of investing in mitigation if financial insurance is not available. The firms' problem is to choose the optimal timing and size of the investment. The timing problem leads to a critical productivity size where firms above it invest in mitigation while firms below the threshold decide to not invest. We investigate how cash aid such as emergency response, and in-kind aid such as reconstruction, rehabilitation or disaster risk reduction investments, affect the critical productivity threshold and the optimal investment size and characterize the international donor's optimal charity strategy.

Suggested Citation

  • Andergassen, Rainer & Sereno, Luigi, 2016. "Natural disasters, mitigation investment and financial aid," Environment and Development Economics, Cambridge University Press, vol. 21(5), pages 603-625, October.
    • Handle: RePEc:cup:endeec:v:21:y:2016:i:05:p:603-625_00
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    Cited by:

    1. Li, C. & van Bergeijk, P.A.G., 2016. "Do natural disasters stimulate international trade?," ISS Working Papers - General Series 622, International Institute of Social Studies of Erasmus University Rotterdam (ISS), The Hague.

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