Do Natural Disasters Stimulate Individual Saving? Evidence from a Natural Experiment in a Highly Developed Country
50 Pages Posted: 19 May 2015
Date Written: May 19, 2015
While various empirical studies have found negative growth-effects of natural disasters, little is yet known about the microeconomic channels through which disasters might affect short- and especially long-term growth. This paper contributes to filling this gap in the literature by studying how natural disasters affect individual saving decisions. This study makes use of a natural experiment created by the European Flood of August 2002. Using micro data from the German Socio-Economic Panel that we combine with geographic flood data, we compare the savings behavior of affected and non-affected individuals by using a difference-in-differences approach. Our empirical results indicate that natural disasters depress individual saving decisions, which might be the consequence of a Samaritan's Dilemma.
Keywords: natural disasters, floods, growth, saving behavior, difference-in-differences approach
JEL Classification: Q540, D140, O160, H840
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