Natural Disasters and Household Welfare : Evidence from Vietnam

As natural disasters hit with increasing
frequency, especially in coastal areas, it is imperative to
better understand how much natural disasters affect
economies and their people. This requires disaggregated
measures of natural disasters that can be reliably linked to
households, the first challenge this paper tackles. In
particular, a methodology is illustrated to create natural
disaster and hazard maps from first hand, geo-referenced
meteorological data. In a second step, the repeated
cross-sectional national living standard measurement surveys
(2002, 2004, and 2006) from Vietnam are augmented with the
natural disaster measures derived in the first phase, to
estimate the welfare effects associated with natural
disasters. The results indicate that short-run losses from
natural disasters can be substantial, with riverine floods
causing welfare losses of up to 23 percent and hurricanes
reducing welfare by up to 52 percent inside cities with a
population over 500,000. Households are better able to cope
with the short-run effects of droughts, largely due to
irrigation. There are also important long-run negative
effects, in Vietnam mostly so for droughts, flash floods,
and hurricanes. Geographical differentiation in the welfare
effects across space and disaster appears partly linked to
the functioning of the disaster relief system, which has so
far largely eluded households in areas regularly affected by
hurricane force winds.