Economics

The objective of this dissertation is to examine the ways in which households recover from and adapt to changing conditions as a result of natural hazards. I use Indonesia as a case study. The dissertation is divided into four chapters. In the first chapter, I give an overview on the policy relevance of studying natural disasters as well as the broad literature on the topic. In the second chapter, I estimate the short- and medium-run economic re-turns to capital and inherent ability by studying the recovery of fishermen in Aceh from the 2004 Indian Ocean tsunami. Since the natural disaster wiped out a sig-nificant portion of productive physical capital among fishermen, the subsequent quasi-random infusion of aid boats generates a natural experiment. Using panel data from fishing households, I investigate whether fishermen who were relatively more productive pre-tsunami retain their productive edge ex-post. Results suggest that (i) returns to inherent ability, measured by pre-tsunami productivity, become more important over time while returns to physical capital, measured by aid boats, become less important in the medium run, and (ii) the redistributive effects of boa