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This paper examines recent work by disaster researchers on the complex role of institutional arrangements in shaping policy decisions. It identifies incentive structures, information gaps and intra-governmental relations as key factors affecting the decisions of national and local authorities. It recommends more interdisciplinary research on political processes and policy change to develop a clearer theoretical focus for Disaster Risk Management, so as to help promote the necessary institutional transformation.

National policy processes are political and non-linear, and the diverse interests and incentives that drive these processes need to be considered. However, Disaster Risk Management (DRM) frameworks are, by definition, normative. They do not consider how different options for reducing risk are identified and selected and the reasons why some options are not addressed. Political economy analysis can help to develop a more sophisticated theory of decision-making around DRM.

DRM measures have some of the characteristics of what economists refer to as 'public goods' because they are underprovided by the market, are free from rivalry and are non-excludible. However, government policies in most countries continue to focus on responding to disaster rather than managing disaster risk.

To examine the institutional influences on DRM policy it is useful to divide the role of government into five categories: 1) providing disaster risk reduction goods and services; 2) avoiding risk; 3) regulating private sector activity; 4) promoting collective action and private sector activity; and 5) coordinating multi-stakeholder activities. Causes of inadequate government performance in these five roles are thought to include lack of interest and political will, resistance, complex political and economic incentive structures, information gaps and coordination problems at different scales of governance:

• Incentive structures: Government policymakers lack political incentives to implement DRM because citizens cannot easily observe the effects of DRM measures and so do not demand them. In addition, there may be significant political costs (such as opposition from powerful interest groups) attached to particular measures. In the case of countries that have a weak national response capacity, a moral hazard for DRM investment is arguably created by the willingness of international aid agencies to provide relief.
• Information gaps: These include the complexity of disaster risk, the many policy options available, and the uncertainty surrounding the relative effectiveness of different strategies. Governments may be willing to implement DRM strategies but be unsure about which measures to adopt to reduce the overall level of risk, protect the most vulnerable, gain political credibility and use funds efficiently. These outcomes may not all be compatible.
• Intra-governmental relations and local governance: It is important to understand the nature of relationships between different levels of government. DRM requires collaboration among many public sector agencies at different levels. However, such agencies are unaccustomed to working collectively on cross-cutting issues.

Understanding power relations and incentives is key to exploiting 'room for manoeuvre' and identifying policy alternatives. However, studies of policy reform in agriculture and rural development suggest that this analysis must be undertaken by insiders – the decision-makers themselves. Therefore, working with relevant actors to understand their interests and inter-relationships should be an essential feature of political economy approaches to DRM. In addition, theories of policy change need to be able to explain the factors influencing policy responses to very different kinds of disaster risk – both slow- and rapid-onset.

Political economy analysis could usefully ask:

• How does DRM get on to the political agenda?
• Is this different from other social policies?
• How important is salience in determining the kind of DRM measures that are adopted?
• How do particular agents operate within the political system?
• What mechanisms do/might they use to change DRM policies?