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.

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.

Thua Thien Hue province in Vietnam is a coastal province with the largest lagoon system in Southeast Asia which has been affected by natural disasters such as floods, storms and droughts. In recent years, changes in climate had strong impacts on the lives and work of the local people, especially those with low incomes as their major livelihoods in the region are heavily reliant on climate and natural resources and on that ground, any changes in the weather patterns heavily affected productivity and household's income. The study uses both primary and secondary data to investigate how natural disasters have affected household welfare in rural Vietnam. Primary data were collected through focus group discussions, individual interviews, and key informant interviews in four communes of Thua Thien Hue province as case studies. The study finds that among the households with different coping strategies, non-farming households have the best adaptive capacity to annual natural hazards. Local people recognize the importance of transferring from on-farm to nonfarm activity to achieve economic resilience to a disaster thereby seek opportunities to move from farming to non-farm activities such as the industry, construction sector and services. This suggests to strengthen the need of provision of nonfarm activities given its role in sustaining household welfare against natural hazards. Under increasing risk and uncertainty pervasive in farming system, if there is no or few potentials to diversify into non-farm income sources in the future, people in the affected areas have no options than becoming poorer.

This work combines research and empirical evidence on the economic costs of disasters with theoretical approaches. It provides new insights on how to assess and manage the costs and impacts of disaster prevention, mitigation, recovery and adaption, and much more.

A history of repeated external and domestic shocks has made economic insecurity a major concern across the Caribbean region. Of particular concern to all households, especially the poorest segments of the population, is the exposure to shocks that are generated by catastrophic events or natural disasters. The author shows that despite high consumption growth, the Caribbean region suffers from a high volatility of consumption that decreases household welfare. After presenting some empirical evidence that consumption volatility is higher in the Caribbean region than in the rest of the world, he makes some empirically testable inferences that help explain consumption volatility. The author develops a conceptual framework for analyzing the effects of catastrophic events on household and aggregate welfare. According to this framework, the volatility of consumption comes from production shocks that are transformed into consumption shocks mostly because of underdeveloped or ineffective risk-management mechanisms. Auffret conducts an empirical analysis of the impact of catastrophic events on 16 countries (6 from the Caribbean region and 10 from Latin America) from 1970-99 and shows that catastrophic events lead to: 1) A substantial decline in the growth of output. 2) A substantial decline in the growth of investment. 3) A more moderate decline in consumption growth (most of the decline is in private consumption, while public consumption declines moderately. 4) A worsening of the current account of the balance of payments.

Citizens’ aspirations for the future are politically important; they are linked to welfare and whether citizens engage in forward-looking political and economic behavior. How do natural disasters affect aspirations, and can governments’ social protection policies successfully mitigate any damaging effects? If natural disasters threaten aspirations, there is strong policy interest in understanding these threats and what government can do to protect aspirations. This article uses Pakistan’s 2010 floods to identify the effects of a natural disaster on citizens’ aspirations. Aspirations were significantly reduced—especially among the poorest and most vulnerable. However, by exploiting exogenous variation in access to targeted government social protection, the authors show that social protection following natural disasters can significantly reduce their negative aspirational effects. This offers a new understanding of government social protection. It not only raises social welfare in the short term by restoring livelihoods and replacing damaged assets; it also has an enduring effect by raising citizens’ aspirations for the future. The authors show not only that the aspirations of citizens matter for citizens’ behaviors, but also that government policies can effectively protect and increase those aspirations. This implies that the value and efficacy of government disaster relief programs are underestimated when aspirations are not taken into account.