Consumption Response to a Natural Disaster: Evidence of Price and Income Shocks from Chennai Flood

59 Pages Posted: 14 Sep 2022 Last revised: 25 Jul 2023

See all articles by Sumit Agarwal

Sumit Agarwal

National University of Singapore (NUS) - Sustainable & Green Finance Institute (SGFIN)

Pulak Ghosh

Indian Institute of Management Bangalore

Huanhuan Zheng

National University of Singapore

Abstract

We utilize monthly individual-level financial data and item-level supermarket sales data to study how consumption responds to one of the costliest natural disasters in India. We find that consumption dropped by 11% during the disaster, 65% of which was recovered after the disaster. On average, consumption per capita dropped by $312 per year, which costs about 5% of the GDP. We also show that natural disasters depressed consumption through income shocks instead of price shocks. Consumers smooth consumption using credit card, banks loans and wealth in coping with the shocks.

Keywords: natural disaster, income shocks, price shocks, online shopping, household finance

Suggested Citation

Agarwal, Sumit and Ghosh, Pulak and Zheng, Huanhuan, Consumption Response to a Natural Disaster: Evidence of Price and Income Shocks from Chennai Flood. Available at SSRN: https://ssrn.com/abstract=4218410 or http://dx.doi.org/10.2139/ssrn.4218410

Sumit Agarwal

National University of Singapore (NUS) - Sustainable & Green Finance Institute (SGFIN) ( email )

Singapore

Pulak Ghosh

Indian Institute of Management Bangalore ( email )

Huanhuan Zheng (Contact Author)

National University of Singapore ( email )

469C Bukit Timah Rd
NUHS Tower Block Level 7
Singapore, 259772
Singapore

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