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Natural disaster mitigation in developing countries : the role of trade openness

Kondrup, Fredrik Ruud; Stierna, Maria Flinder
Master thesis
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URI
http://hdl.handle.net/11250/2560018
Date
2018
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  • Master Thesis [4207]
Abstract
Employing fixed effects estimations in a panel of 137 countries over 37 years, this study

empirically investigates the relationship between trade openness and natural disaster fatality

rates in developing countries. The findings suggest that trade openness reduces fatality rates

from natural disasters in general in the developing world, and in particular losses resulting

from earthquakes, storms and extreme temperature disasters. Specifically, our estimates

suggest that for developing countries, increasing the trade ratio by 10% is significantly

associated with a 2-3% reduction in subsequent natural disaster fatality rates. Building upon

the initial findings, the analysis further suggests that the mitigating effect of trade openness

on natural disaster losses arises from knowledge- and technology transfers, international

collaboration, and improvements of infrastructure and investment climate. The established

reduction in fatalities from trade openness is robust to various specifications; however, the

extent to which trade openness mitigates losses depends on disaster type and countryspecific

features such as development level, degree of democracy and the efficiency of the

public sector. The central policy implication of our findings is that trade policy may be a

potential tool for developing countries to mitigate natural disaster risk without compromising

economic development.

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