Institutions and the losses from natural disasters

Abstract. Natural hazards can be seen as a function of a specific natural process and human (economic) activity. Whereby the bulk of literature on natural hazard management has its focus on the natural process, an increasing number of scholars is emphasizing the importance of human activity in this context. Existing literature has identified certain socio-economic factors that determine the impact of natural disasters on society. The purpose of this paper is to highlight the effects of the institutional framework that influences human behavior by setting incentives and to point out the importance of institutional vulnerability. Results from an empirical investigation of large scale natural disasters between 1984 and 2004 show that countries with better institutions experience less victims and lower economic losses from natural disasters. In addition, the results suggest a non-linear relationship between economic development and economic disaster losses. The suggestions in this paper have implications for the discussion on how to deal with the adverse effects of natural hazards and how to develop efficient adaption strategies.