THE ECONOMICS OF DISASTER RISK AND RECOVERY:  THREE ESSAYS ON SRI LANKA

Dramatic increase of economic losses from Natural disasters derail economic and human development in many places. This dissertation sheds light on natural disaster risk and short-term and long-term household wellbeing after disasters. It is composed of three empirical studies of Sri Lanka. The first study examines the impacts of frequently occurring extreme weather events on individual health and health care cost using national household data. The analysis shows that local floods and droughts impose a significant risk to health when individuals are exposed directly and their communities indirectly to these hazards. These risks are associated with the land-use in the affected regions and the status of access to sanitation and hygiene. Health risks due to flood and drought cause a considerable economic burden on the private and public health care sectors. Finally, we learn that recurring extreme weather events may potentially be sources of significant health risk and economic cost to a rapidly growing developing country that call for alternative policies focusing on the socio-economic environment, and land use to manage these health risks. The second study estimates a difference- in- difference (DID) model to examine the 2004 Indian Ocean tsunami’s long-term impacts on household wellbeing in Sri Lanka. The study finds a strong association between area-wide tsunami disaster shock and increases in household income and consumption in the long-term. The increase in consumption is much smaller than the observed increase in income; the study reveals an increase in food consumption and only a marginal increase in non-food consumption. The third study analyses the 2004 tsunami recovery’s impact on income distribution across households in the long-term in Sri Lanka using quantile difference-in-difference methods and inequality measures. Recovery of household income is observed across the entire distribution of affected households. The income recovery is skewed to low-income households; the affected regions appear more income-equal ex-post compared to the unaffected regions. A similar pattern appears for consumption. Finally, the findings in the second and third studies show a potential for a long-lasting and successful recovery from a catastrophic disaster.