Black Swans and the Social Value of Corporate Disaster Giving

Abstract

Over 90 percent of the deaths from natural disasters have occurred in low- and middle-income countries, yet more than 85 percent of in-kind and monetary relief coming from business organizations worldwide has gone to high-income economies. From the perspective of social welfare, does this mean an inefficient allocation of economic resources? Is this a failure of the doing well by doing good argument? To assess these empirical questions, we study donations by corporations from 65 countries to the relief and reconstruction fund of 3,115 high-magnitude, low probability disasters that affected the world between 2003 and 2013. We argue and provide evidence that business giving efficiently specializes in black swans, highly unexpected and costly phenomena that maximize the incapacity of the state to cope with the economic hardship. In such contexts, corporate giving acts as a stop-loss mechanism and complements public funding in nations that have been historically deprived of public multilateral aid.