The Economic Impacts of Direct Natural Disaster Exposure

40 Pages Posted: 24 Aug 2020

See all articles by Meliyanni Johar

Meliyanni Johar

University of Technology Sydney (UTS)

David W. Johnston

Monash University

Michael Shields

Monash University

Peter Siminski

University of New South Wales (UNSW) - Social Policy Research Centre (SPRC)

Olena Stavrunova

University of Technology Sydney (UTS)

Abstract

This paper studies how having your home damaged or destroyed by a natural disaster impacts on economic and financial outcomes. Our context is Australia, where disasters are frequent. Estimates of regression models with individual, area and time fixed-effects, applied to 10 waves of data (2009-2018), indicate that residential destruction has no average impact on employment and income, but increases financial hardship and financial risk aversion. These impacts are generally short-lived, larger for renters than home owners, and greater for smaller isolated disasters. Using a Group Fixed Effects estimator, we find that around 20% of the population have low resilience to financial shocks, and for these individuals we find a substantive increase in financial hardships. The most vulnerable are the young, single parents, those in poor health, those of lower socioeconomic status, and those with little social support. These results can help target government aid after future natural disasters to those with the greatest need.

Keywords: natural disasters, financial hardship, risk aversion, mental health, resilience

JEL Classification: Q54, J21, I31, G50, C23, H84

Suggested Citation

Johar, Meliyanni and Johnston, David W. and Shields, Michael and Siminski, Peter and Stavrunova, Olena, The Economic Impacts of Direct Natural Disaster Exposure. IZA Discussion Paper No. 13616, Available at SSRN: https://ssrn.com/abstract=3679022

Meliyanni Johar (Contact Author)

University of Technology Sydney (UTS) ( email )

15 Broadway, Ultimo
Australia
+61 2 9514 7742 (Phone)
+61 2 9514 7711 (Fax)

Michael Shields

Monash University ( email )

23 Innovation Walk
Wellington Road
Clayton, Victoria 3800
Australia

Peter Siminski

University of New South Wales (UNSW) - Social Policy Research Centre (SPRC) ( email )

Sydney, NSW 2052
Australia
+61 2 9385 7827 (Phone)

Olena Stavrunova

University of Technology Sydney (UTS)

15 Broadway, Ultimo
PO Box 123
Sydney, NSW 2007
Australia

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