There is little micro-evidence on the persistence of natural disasters’ welfare impacts. This paper assesses the effect of Hurricane Mitch on consumption of Nicaraguan agricultural households. Mitch occurred in October 1998. Pre-post data is obtained from a nationally representative panel collected in 1998 and 2001. An additional survey was fielded in 1999 for households from the panel affected by the hurricane. The 1999 data contains self-reported measures of hurricane-induced losses. Satellite rainfall observations are used as a complementary measure of the shock. Using the structure of the data, the paper disentangles the idiosyncratic and common dimensions of the shock, together with its short and mediumterm impacts. Within the sample of households affected by the hurricane, micro-growth model estimates point to short-term negative effects at most limited to idiosyncratic events such as floods and displacement. Mitch’s medium-term common impact is then analyzed as a quasiexperiment. Difference-in-differences estimates do not provide evidence that households affected by Mitch suffered from lower growth between 1998 and 2001. Overall, hurricane Mitch’s direct consumption impact thus exhibits little persistence.
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Natural hazards, an increasingly important phenomenon, have a direct impact at regional and household level. The growing incidence and persistence of natural events are strongly linked to increasing vulnerability of households and communities in developing countries. Previous socioeconomic vulnerabilities may exacerbate the impact of a specific event, making more difficult the process of recovery. Using a five wave panel data set with information on natural disasters we explore the relationship between natural hazard and poverty in Peruvian context. We find that the probability of being “Always Poor” is 21 times the probability of being “Never poor”, given that the household experienced a natural disaster. In addition, natural disasters have a negative impact over monthly per capita consumption growth. Furthermore, this negative effect is higher for households located at the bottom of the income distribution.
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Shocks are often primarily associated with downward mobility or short-term movements in and out of poverty. However, households at the bottom of the welfare distribution are likely to face the most constraints to access insurance mechanisms. In this paper, we consider whether shocks directly affect poverty persistence. In order to analyze the impact of shocks on households’ welfare path over time, we define trajectories as the sequence of households’ position along the welfare distribution as time unfolds. Trajectories provide a consistent representation of households’ mobility when the first-order Markov assumption is violated. In a three-round Nicaraguan panel, we assess the role of shocks in driving two specific mobility patterns. We confirm that shocks contribute to downward mobility, but find novel and robust evidence that shocks trigger poverty persistence, preventing upward movement from the bottom of the distribution. This result points to large potential gains from social risk management policies targeting not only the vulnerable non-poor, but also and in priority the poor.
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This paper presents and applies the social risk management (SRM) conceptual framework to examine links between disaster risk, hazards, vulnerability, risk management, and social protection (SP). The paper makes the case that it is important to mainstream social protection policies into the disaster risk management (DRM) agenda and, vice versa as a means to improve household and community resilience to natural disasters. The paper proposes different types of actions that can help households and communities better manage risks related to natural hazards, especially by promoting SP policies and programs that could reduce vulnerability through various ex-ante actions that strengthen assets and livelihoods, and improved “planned coping”, which are ex-ante interventions that help households and communities recover and reconstruct assets and livelihoods after a hazard event is manifested.
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Conditional cash transfer (CCT) programs have proved to be effective in inducing chronic poor households to invest in the human capital of their children while helping reduce poverty. They have also protected child human capital from the shocks that affect these households. In this paper, we argue that many non-poor households exposed to uninsured shocks have to use children as risk coping instruments, with the risk of creating long term irreversibilities in child human capital development. We review recent experiences to explore how CCT programs could be designed to serve as safety nets for the vulnerable non-poor when hit by a shock. This would require a number of modifications to the way rules of operation of CCT programs are currently designed. As developing countries enter into a period of increasing economic turbulence, providing extended safety nets to the children of the transitory-poor is becoming a key feature of social protection.
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