Natural disasters, social protection, and risk perceptions

Abstract

Natural disasters give rise to loss and damage and may affect subjective expectations about the prevalence and severity of future disasters. These expectations might then in turn shape individuals’ investment behaviors, potentially affecting their incomes in subsequent years. As part of an emerging literature on endogenous preferences, economists have begun studying the consequences that exposure to natural disasters have on risk attitudes, perceptions, and behavior. We add to this field by studying the impact of being struck by the December 2012 Cyclone Evan on Fijian households’ risk attitudes and subjective expectations about the likelihood and severity of natural disasters over the next 20 years. The randomness of the cyclone’s path allows us to estimate the causal effects of exposure on both risk attitudes and risk perceptions. Our results show that being struck by an extreme event substantially changes individuals’ risk perceptions as well as their beliefs about the frequency and magnitude of future shocks. However, we find sharply distinct results for the two ethnicities in our sample, indigenous Fijians and Indo-Fijians; the impact of the natural disaster aligns with previous results in the literature on risk attitudes and risk perceptions for Indo-Fijians, whereas they have little to no impact on those same measures for indigenous Fijians. To provide welfare implications for our results, we compare households’ risk perceptions to climate and hydrological models of future disaster risk, and find that both ethnic groups over-infer the risk of future disasters relative to the model predictions. If such distorted beliefs encourage over-investment in preventative measures at the cost of other productive investments, these biases could have negative welfare impacts. Understanding belief biases and how they vary across social contexts may thus help decision makers design policy instruments to reduce such inefficiencies, particularly in the face of climate change.

Analysis of Farmers’ Stated Risk Using Lotteries and Their Perceptions of Climate Change in the Northwest of Mexico

“…Most of the risk-tolerant farmers (red points) are located to the right of the first dimension, exhibiting a higher perception of the weather patterns related to climate change, compared to the risk-averse farmers. This result is similar to the finding of Pomareda (2008) [71] and Brown et al (2017), who found that effect of natural shocks affects risk attitudes and perceptions [72]. Furthermore, risk-tolerant farmers (red points) are more concentrated in the upper part of the second dimension, showing that they perceive to a greater extent that climate change has a high impact on their production.…”

Evaluation of Disaster Medicine Preparedness among Healthcare Profession Students: A Cross-Sectional Study in Pakistan

“…According to Brown et al, respondent attitudes, perceptions, and behavior toward disasters can be affected by exposure to and experience with such events. However, this study did not measure respondents' experience and exposure [51]. This study only focused on a few geographical areas of Pakistan.…”

“…Academic institutions can contribute leadership and resources to societal disaster preparedness [53]. Several studies strongly recommended that continuous and consistent disaster knowledge, skills, and preparedness content be included in college curricula [50][51][52][53][54][55][56].…”

The Long-Term Impact of International Migration on Economic Decision-Making: Evidence from a Migration Lottery and Lab-in-the-Field Experiments

“…A number of studies have found that large unexpected negative shocks (e.g. natural disasters, stock market losses, experiences of violence) impact preferences, at least for some groups in the population (Eckel et al 2009;Malmendier and Nagel 2011;Callen et al 2014;Carvalho et al, 2016;Brown et al, 2016). These findings have led to development of theoretical models that incorporate history-dependence (Dillenberger and Rozen 2015).…”