Do Natural Disasters Change Savings and Employment Choices? Evidence from Bangladesh and Pakistan

29 Pages Posted: 8 Jan 2017

See all articles by Shaikh Eskander

Shaikh Eskander

London School of Economics - Grantham Research Institute on Climate Change and the Environment

Samuel R. Fankhauser

London School of Economics & Political Science (LSE) - Grantham Research Institute on Climate Change and the Environment

Shikha Jha

Asian Development Bank

Date Written: December 23, 2016

Abstract

We investigate the economic response of households to natural disasters in Bangladesh and Pakistan. In particular, we explore to what extent households adjust their income and employment strategies and savings in response to exposure to floods and storms. Using two unique panel datasets, we find evidence of autonomous adjustments in both countries. In Bangladesh, farmers move away from farm to nonfarm employment as a coping strategy to tackle immediate reductions in their total household income from exposure to disasters, whereas nonfarmers increase their off-farm labor supply. Such adjustments in employment strategies are stronger among the storm-affected households than the flood-affected households. On the other hand, although farmers in Pakistan move away from agriculture as an immediate response to disasters, they eventually come back to agriculture within a year of disaster exposure. We also identify that such adjustments in employment and income strategies help farmers to overcome the immediate losses from disaster exposure as the disaster-affected households from both Bangladesh and Pakistan exhibit at least no decrease in their savings behavior. We discuss policy implications in terms of developing nonfarm employment opportunities to reduce the future harms of disaster and financing economic migration to reduce income vulnerability.

Keywords: Bangladesh, income, natural disasters, Pakistan, savings

JEL Classification: D13, D64, Q15, Q24, Q54

Suggested Citation

Eskander, Shaikh and Fankhauser, Samuel R. and Jha, Shikha, Do Natural Disasters Change Savings and Employment Choices? Evidence from Bangladesh and Pakistan (December 23, 2016). Asian Development Bank Economics Working Paper Series No. 505. Available at SSRN: https://ssrn.com/abstract=2894791 or http://dx.doi.org/10.2139/ssrn.2894791

Shaikh Eskander

London School of Economics - Grantham Research Institute on Climate Change and the Environment ( email )

Houghton Street
London, WC2A 2AE
Great Britain

Samuel R. Fankhauser

London School of Economics & Political Science (LSE) - Grantham Research Institute on Climate Change and the Environment ( email )

Houghton Street
London, WC2A 2AE
Great Britain

Shikha Jha (Contact Author)

Asian Development Bank ( email )

6 ADB Avenue, Mandaluyong City 1550
Metro Manila
Philippines

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