Essays on Disaster Risk and Economic Development

This thesis consists of four self-contained papers in the areas of disaster risk and economic development. Chapter One provides a qualitative survey of the empirical literature on the nexus among poverty, inequality and natural disasters. The last few years have seen an explosion of economic research on the consequences of natural disasters. This new interest is attributable first and foremost to a growing awareness of the potentially catastrophic nature of these events, but also a result of the increasing awareness that natural disasters are social and economic events. Here, we survey the literature that examines the direct and indirect impact of natural disaster events specifically on the poor and their impact on the distribution of income within affected communities and societies. With a meta-regression analysis of the existing literature on the impacts of disasters on households in Chapter Two, we observe several general patterns. Incomes are clearly impacted adversely, with the impact observed specifically in per-capita measures. Consumption is also reduced, but to a lesser extent than incomes. Poor households appear to smooth their food consumption by reducing the consumption of non-food items; in particular health and education, and this suggests potentially long-term adverse consequences. Given the limits of our methodology and the paucity of research, we find no consistent patterns in long-term outcomes. We place disaster risk to the poor within the context of sustainable development and future climatic change. Our objective In Chapter Three is to identify all of the directly observable determinants’ of publicly allocated and realized spending for disaster risk reduction (DRR) at the local government (sub-district) level in Bangladesh. We employ the Heckman two-stage selection model with detailed public finance and other data from 483 sub-districts (Upazilas) across the country. While some of our results conform with our priors, our estimations surprisingly find that government does not respond to the sub-district’s risk exposure as a factor affecting the DRR financing mechanism. This variable is consistently counter-intuitively statistically insignificant. The DRR regional allocations do not seem to be determined by risk and exposure, only weakly by vulnerability, nor even by more transparent political economy motivations. In Chapter Four, we examine the short-run economic impacts of recurrent flooding on Bangladeshi households surveyed in 2000, 2005 and 2010. In 2010 Household Income and Expenditure Survey (HIES), households answered a set of questions’ on whether they were affected by flood and its likely impacts. We identify two treatment (affected) groups by using the self-reported data and historical rainfall data based flood risk index. We estimate a difference-in-difference (DID) model to quantify the impacts on income, expenditure, asset and labour market outcomes and further extend our analysis to different income and expenditure brackets. Overall, we find robust evidence of negative impacts on agricultural income and expenditure. Intriguingly, the extreme poor (i.e. the bottom 15th quintile) experience significant positive impacts on agricultural income in the self-reported treatment case.