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The Economic Impacts of Natural Disasters$
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Debarati Guha-Sapir and Indhira Santos

Print publication date: 2013

Print ISBN-13: 9780199841936

Published to Oxford Scholarship Online: September 2013

DOI: 10.1093/acprof:oso/9780199841936.001.0001

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How Do Households Manage the Effects of Natural Disasters?

How Do Households Manage the Effects of Natural Disasters?

The Role of Interhousehold Transfers in Nicaragua

(p.226) 10 How Do Households Manage the Effects of Natural Disasters?
The Economic Impacts of Natural Disasters

Indhira Santos

Oxford University Press

This chapter explores the role of interhousehold transfers in helping households recover from a natural disaster. I focus on the case of Hurricane Mitch in rural Nicaragua, exploiting the availability of panel household survey data before and after the disaster. The quasi-experimental evidence suggests that interhousehold transfers did increase significantly due to Mitch, especially for the households most affected by the shock. On average, a household that experienced losses equivalent to one month of income due to Mitch, received 57 cordobas (US$4.75) more per month in private transfers (more than 90 percent of pre-shock average monthly transfers). For a household at average income, whose losses amounted to one year of income, these new transfers offset 38 percent of the losses in the eight months after Mitch. Importantly, however, there is evidence that private transfers were partly crowded out by public transfers. Private transfers decreased by 25 cents for every cordoba of public transfers received. These results provide support for the altruistic or insurance models as a motivation for private transfers.

Keywords:   Natural disaster loss, hurricane, Hurricane Mitch, Nicaragua, aid

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