Are Private Defensive Expenditures against Storm Damages Affected by Public Programs and Natural Barriers? Evidence from the Coastal Areas of Bangladesh

This paper introduces a household model of private investment in storm protection under an endogenous risk framework to determine how ex-ante self-protection and ex-post self-insurance spending by coastal households to mitigate storm-inflicted damages are affected by the availability of public programs and the presence of a mangrove forest. The theoretical results show that ex-ante publicly constructed physical barriers and mangroves are complements to self-protection but substitutes to self-insurance. However, ex-post public disaster relief and rehabilitation programs are substitutes to self-protection but complements to self-insurance. Our empirical analysis of coastal households in Bangladesh impacted by Cyclone Sidr reveals partial support for crowding out and crowding in effects of public investments and programs. Households located in a mangrove protected area invest more in self-protection and less in self-insurance. Other controls, such as household socioeconomic characteristics, also influence and add a degree of complexity to the relationship