comprehensive and targeted risk mitigation strategy. Finally, the government should pay special attention to rural areas. Doing so would contribute to a forward-looking poverty reduction strategy in El Salvador, potentially allowing for a more sustainable development trajectory.

**The paper is organized as follows.** Section 2 describes the country context. Section 3 details the definitions and summarizes the recent literature. Section 4 presents the methodology applied. Section 5 presents the empirical results, which include our estimates and their drivers, as well as temporal trends. Section 6 presents several robustness tests and a sensitivity analysis to investigate the validity of our main messages. Finally, section 7 concludes and presents policy insights.

# **2. Country Context**

**Studying vulnerability in El Salvador is highly relevant, given that the country is marked by a variety of different hazards.** The country is exposed to several hazards, which is reflected when comparing the country in its vulnerability globally. El Salvador scores 4.7 out of 10 in the INFORM Global Risk Index 2021 and ranks 58th (DRMKC, 2021). One important dimension of the country's vulnerability is its high emigration rate. In mid-2020, 1.6 million El Salvadorians lived abroad, representing one-fourth of the country's total population, one of the highest numbers worldwide (Migration Data Portal 2021). This significant emigration rate and a slowing demographic dividend pose challenges to the country's development trajectory. It also creates a high dependency on remittances (Robayo-Abril and Barroso, 2022). In general, El Salvador is highly dependent on the US economy, with one-third of its imports originating in the US (Trading Economics, 2022). Similarly, 40 percent of its exports flow to the US (ibid).

**Moreover, the country is vulnerable to the spread of epidemics, and crime rates are high.** The country's high population density makes it prone to epidemics and the spread of illness (Robayo-Abril and Barroso, 2022). Additionally, crime rates are high. In 2018, El Salvador was the country with the highest homicide rate globally (World Development Indicators, 2021). The intentional homicide rate is 52.0 per 100,000 people (ibid). Property crimes are also prevalent in the country, accounting for 47 percent of all crimes (OSAC, 2021). Additionally, El Salvador is marked by violent, well-armed street gangs, further increasing individuals' vulnerability (ibid). All these characteristics add up to a generally high exposure to human hazards.

**In addition, El Salvador has high exposure to natural hazards.** El Salvador is vulnerable to natural hazards, with an INFORM Index of 6.5 out of 10 (DRMKC, 2021). Earthquakes are especially pertinent, with an index of 9.7, followed by Tsunamis with an index of 8.2. Also, El Salvador is highly vulnerable to climate change, and vulnerability has increased over the years. The country ranks 106 out of 181 on the NDGAIN Index<sup>5</sup> (World Bank Group, 2021a). This exposure is mainly due to its location, which increases the probability of extreme weather events. The complex environmental, social and institutional situation adds to the overall challenging situation. El Salvador's economic dependency on climate-sensitive economic activities, such as agriculture, forestry, and economic activities in coastal areas, further exacerbates the situation.

**When compared to other countries in the region, El Salvador is marked by high levels of vulnerability.** At a subnational level, several of El Salvador's departments report high vulnerabilities compared to Latin America and the Caribbean (World Bank Group, 2021b). El Salvador's subnational vulnerability index varies between 17.4 and 33.7 on the subnational Socioeconomic Vulnerability Index (SEVI).<sup>6</sup> Twelve of the country’s 14 departments are located among the most vulnerable half of subnational

> 5 The ND-Gain index is a summary index about a country’s vulnerability to climate change and other challenges as well as its resilience to tackle them.

> 6 The SEVI Index is a subnational index measuring the socioeconomic vulnerability of subnational regions in LatinAmerica and the Caribbean in 2019. It ranks from 0 to 100, with 100 being the highest possible exposure to vulnerability. In 2019, the highest obtained value on the SEVI Index was 50.1 by Alta Verapaz in Guatemala. The lowest value was 8.6  for Antofagasta in Chile.

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