charity hazard on international level. Estimates using data on major storm events show that increases in the level of past foreign aid imply higher death tolls resulting from natural disasters. For flood disasters and major earthquakes we find some evidence that past foreign aid can increase the probability that the death toll from disasters is non-zero, however, it also reduces the total number of deaths from disasters. As we are using lagged foreign aid as an empirical proxy for anticipated disaster aid, it is not possible to disentangle the two negative effects and the positive (side-)effects of foreign aid on infrastructure and disaster management. The major implication for future research is that an analysis of the effects of aid on natural hazard management largely differs across types of disasters and that a better empirical proxy for the anticipation of international disaster aid is needed.

The major policy implication of our results is not a call for a reduction of foreign aid but rather a call for rethinking strategies for international assistance and redesigning existing aid programs. The design of transfers, foreign aid in particular, has been drawing attention in economics for a long time (e.g. Nichols 1982, Besley & Coate 1991, Coate 1995, Gahvari & Mattos 2007). The major findings of these articles are that unrestricted transfers induce people to diminish ex-ante protection activities (charity hazard) and to shirk responsibilities. In order to avoid these problems "the tying of aid" (Jepma 1991) through in-kind transfers and conditional transfers, is of interest. In fact, the theoretical model of Coate (1995) shows that in-kind transfers (e.g. provision of insurance) and conditional transfers can overcome the adverse effects of altruism. Applied to the natural hazard context, this result would suggest that the provision of ex-ante in-kind transfers (e.g. building of a dike, early warning system for earthquakes) to countries at risk could reduce the dilemma situation. Since this form of transfer is less fungible, the possibility of misuse is limited allowing for a higher probability of surviving natural disasters.

Although in-kind and restricted transfers reduce the above mentioned weaknesses of unrestricted aid, they are criticized for causing dead-weight-losses due to a lack of information about recipients' preferences. Moreover, due to asymmetric information, even the provision of in-kind transfers does not ensure the protection of the most vulnerable people. However, the valuation of in-kind and cash transfers in the case of natural hazards might be somehow different, since mitigation activities do not only require financial capital but also expertise. Since developing countries in particular lack this expertise, unrestricted aid will not necessarily lead to efficient targeting. Although alternative adaptation strategies require future research, the impression at first glance is that ex-ante in-kind transfers could be a possible solution in case of natural hazards, since mitigation activities are likely to reduce the extent of disasters and the need for ex-post relief. A lower vulnerability to catastrophic events could reduce (at least to a certain extent) developing countries' dependency on foreign aid and contribute to a more independent development of these countries. As economic research on the efficiency of in-kind transfers is far from satisfying, it requires a better understanding of the incentives created by in-kind transfers before developing alternative instruments of foreign assistance.

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