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Aid, Catastrophes and the Samaritan's Dilemma

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Author Info
Paul A. Raschky ()
Manijeh Schwindt ()
Abstract

This paper discusses the impact of expected foreign aid in case of catastrophic events on the level of mitigative activities in aid-receiving countries. The theoretical model shows that the anticipation of foreign aid partly crowds out preventive collective action. The crowding-out effect can result in both a lower probability of surviving an disaster and an increase in an event's proportion. In order to test the theoretical propositions we analyse the effect of foreign aid dependence on a) ex-ante risk-management activity proxied by the death toll from 317 major earthquakes occurring worldwide between 1980 and 2002 and b) the likelihood of cholera epidemics between 1980 and 2001. Our estimates suggest that foreign aid in previous years is crowding out ex-ante risk-management activities in recipient countries. The paper concludes with propositions on the deployment of foreign aid.

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Paper provided by Faculty of Economics and Statistics, University of Innsbruck in its series Working Papers with number 2008-06.

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Keywords: Foreign Aid; Samaritan's Dilemma; Catastrophes;

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Find related papers by JEL classification:
O17 - Economic Development, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
O19 - Economic Development, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations
Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters

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  1. Jesus Crespo Cuaresma & Andreas Breitenfellner, . "Crude Oil Prices and the Euro-Dollar Exchange Rate: A Forecasting Exercise," Working Papers 2008-08, Faculty of Economics and Statistics, University of Innsbruck. [Downloadable!]
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