Resilience in the Wake of Disaster: The Role of Social Capital in Mitigating Long-Term Well-Being Losses

Santiago Budría (), Alejandro Betancourt-Odio () and Marlene Fonseca ()
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Santiago Budría: Universidad Nebrija
Alejandro Betancourt-Odio: Universidad Pontificia Comillas
Marlene Fonseca: Universidad Nebrija

No 17907, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Climate change is intensifying the frequency and severity of weather-related natural disasters. These events generate significant monetary and non-monetary costs, undermining individual and societal well-being. Using a nationally representative longitudinal dataset from Australia, this study explores the dynamics of well-being before, during, and after natural disasters, with a particular focus on the mediating role of social capital. We employ an event-study design with individual fixed effects to capture both immediate and long-term effects of natural disasters on four critical dimensions of well- being: financial satisfaction, safety satisfaction, mental health, and psychological distress. Our findings reveal that the adverse impacts of natural disasters are profound and long-lasting, persisting in some cases for over 6–7 years, with well-being implications exceeding $1,500,000 in equivalent losses. We find that social capital emerges as a powerful buffer, significantly mitigating declines in safety satisfaction and mental health while reducing psychological distress both during and after disasters.

Keywords: mental health; hedonic adaptation; panel fixed-effects; well-being; psychological distress (search for similar items in EconPapers)
JEL-codes: C23 G50 I31 J21 (search for similar items in EconPapers)
Date: 2025-05
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