The impact of natural and manmade disasters on household welfare

Agricultural Economics, 2007, vol. 37, issue s1, pages 59-73

Abstract: In this article, we provide selective evidence on the impact of natural and manmade disasters on household welfare. First, we consider "ex ante" risk management and "ex post" risk-coping behaviors separately, showing evidence from the Asian economic crisis, earthquakes, and tsunami disasters. Second, we differentiate idiosyncratic risks from nondiversifiable aggregate risks that characterize a disaster. We also discuss the difficulties of designing index-type insurance against natural disasters, which are often rare, unforeseen events. Then, we investigate the role of self-insurance against large-scale disasters under which formal or informal mutual insurance mechanisms are largely ineffective. Credit accessibility is identified as one of the key factors facilitating risk-coping strategies. Copyright 2007 International Association of Agricultural Economists.

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