In our analysis we focus on the interactions between the most active donors analyzed in the previous section: the US, Japan, Germany, the UK and Norway. These five donors are not only the most active ones, but also fairly good predictors of the international aid response as summarized in Figure 5. The average number of other OECD donors responding to each emergency increases from 0.47 when none of the major donors intervenes to 7.07 when all of them respond. The main advantage of focusing only on the five principal donors is that we can build on the results presented in the previous section and use the bilateral variables relevant for each individual donor as instruments in a TwoStage Least Squares (2SLS) setup.

The results of the 2SLS estimation are summarized in Table 7 below. In addition to the full set of covariates used in the previous section, we now include the number of other main donors providing aid for a given emergency, which we instrument with bilateral distance in the first stage regressions. We test the validity of our instruments with the Sargan/Hansen overidentification test; p-values between 0.14 (Germany) and 0.98 (UK) imply that the null of instrument validity cannot be rejected. Given the large set of controls included in our specification, the predictive power of our instruments is limited. As shown at the bottom of Table 7, the Cragg-Donald F-statistics ranges between 4.56 (Germany) and 7.21 (US); as a result, our estimates are likely to display some of the upward bias expected for basic OLS estimates in our setup. A Cragg-Donald statistic of 6.4 implies a maximum relative IV bias of 20 percent in our setup (Stock and Yogo, 2005). Even though this implies that our point estimates are likely to be upward biased at the margin, our results provide evidence for positive and highly significant interaction among donors. Our point estimates imply that the likelihood to provide aid for a given disaster increases between 19.2 (US) and 33.6 (Germany) percentage points with each other major donor committing to provide help for a given disaster.

[Table 7: Donor Interaction. IV Estimates]

# **6 Summary and Conclusions**

In this paper we have used a sample of more than 400 recent natural disasters to systematically evaluate the degree to which humanitarian need is reflected in international humanitarian aid flows. We have shown that donor governments are on average significantly more generous towards geographically closer, politically less affine and oil exporting countries. We also find significant biases in favor of former colonies, and evidence for herding in the international aid process. While the extent of the various biases varies significantly across countries, the correlation between the current allocation of aid and the actual humanitarian losses associated with natural disasters is surprisingly low. While we have presented some evidence on private donations in this paper, data limitations have prevented us from going further into the details of private aid and its determinants. Given the growing role of the private sector in the humanitarian field, more studies on the interaction of private contributions in general, and the interaction of private preferences with domestic media in particular, appear desirable.

15