aid is no longer significant for the storm sub-sample, neither is the colony dummy nor the interaction term. In contrast to our expectations, we find some evidence that aid-flows in former colonies (interaction term between lagged aid and U.K. colony for the storm subsample and interaction term between French colony and lagged aid for the flood sub-sample) actually reduces the number of flood victims. These results could indicate that increased aid-flows due to colonial history had direct or indirect effects on disaster preparedness that outweigh the (even higher) crowding-out effect of aid-flows to former colonies.

Table 10 introduces an interaction term between the lagged aid and the institutional quality variable. As before, there is mixed evidence of the effect of aid on disaster preparedness. However, there is a general trend observable that the interaction term of lagged aid and institutional quality has a decreasing effect on disaster fatalities. These results contribute to the discussion on the relationship between institutional quality and aid effectiveness (Burnside & Dollar 2000, Easterly, Levine & Roodman 2004) In accordance with the discussion in this literature, our results appear to be rather fragile and only have explorative character. Our results are robust to the inclusion of the GINI-variable. The GINI-coefficient itself does not appear to have a significant effect on the number of disaster fatalities.

In the next step we reproduce our results using ZINB (Tables 11-17 in the appendix). Again the results differ between the sub-samples. Lagged aid seems to have an increasing effect on disaster fatalities (at least at the 10 % significance level) in the case of storms. Regarding the estimates for the flood sub-sample we find an interesting pattern: in the first stage probit, lagged aid appears to increase the probability that the number of deaths from floods is positive. However, the second stage suggests that aid has a mitigating effect on the total number of flood deaths. The estimates using the earthquake sub-sample show a similar pattern but the coefficient of aid in the second stage is not significant. We interpret these results as follows: Foreign aid flows reduce the overall extent of flood and earthquake disasters. Nevertheless, aid can also crowd-out the incentives of governments to install preventive measures or enact zoning or building codes that increase the probability of survival or, in other words, reduce the probability that a deadly disaster occurs.

This general pattern persists throughout the ZINB estimates. Reproducing the estimates with institutional quality, lagged aid and the interaction between aid and institutions shows that the overall effect of aid in either sub-sample is reduced. While in the flood subsample the lagged aid coefficient is positive the interaction term between institutional quality and aid is negative. For floods and earthquakes the relationship is mainly vice versa. The results need to be interpreted with caution as some of the estimates did not converge.

# **7  Concluding Remarks**

Based on the results of the existing literature on the socio-economic determinants of a country's vulnerability against catastrophic events (Anbarci et al. 2005, Kahn 2005), we analyzed the effect of foreign aid dependence on the recipient country's protection against large-scale disasters. Our theoretical model suggests that foreign aid can have both negative and postive effects. If the sum of fungibility and crowding-out effect outweighs the preventive effect, foreign aid in previous periods will decrease incentives to provide protective measures and ultimately lead to a higher death toll from natural disasters. The empirical section of our study provides some evidence for 15