Foreign Aid and (Big) Shocks: Evidence from Natural Disasters

We explore the effect of (big) shocks on the allocation of (bilateral) aid using natural disasters as natural experiments. We find that aid commitment statistically significantly increases following natural disasters, and that humanitarian aid precedes structural aid. While we find that the average effect is quantitatively significant, poorest countries or countries faced with most damaging natural disasters do not receive the most aid. We find no evidence that foreign aid commitment disburses faster following natural disasters. Further explorations into the mechanisms driving aid in disaster countries point to the importance of political alignment with (major) donors in recipient countries with low state capacity.