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Rules for Recovery: Impact of Indexed Disaster Funds on Shock Coping in Mexico

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  • Alejandro del Valle
  • Alain de Janvry
  • Elisabeth Sadoulet

Abstract

Government provision of disaster transfers is typically hampered by liquidity constraints and by weak rules and administrative capacity to disburse reconstruction resources. We show that by easing these hurdles, Mexico's indexed disaster fund (Fonden) considerably accelerates economic recovery after a disaster. To estimate Fonden impact on recovery, as measured by night lights, we exploit the heavy rainfall index that determines program eligibility. We find that for one year after a disaster, eligible municipalities are 6 percent brighter than those ineligible, with gains likely concentrated among less resilient municipalities. We additionally document how Fonden rules shield resources from political abuse.

Suggested Citation

  • Alejandro del Valle & Alain de Janvry & Elisabeth Sadoulet, 2020. "Rules for Recovery: Impact of Indexed Disaster Funds on Shock Coping in Mexico," American Economic Journal: Applied Economics, American Economic Association, vol. 12(4), pages 164-195, October.
    • Handle: RePEc:aea:aejapp:v:12:y:2020:i:4:p:164-95
    DOI: 10.1257/app.20190002
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    References listed on IDEAS

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    1. Yingying Dong & Arthur Lewbel, 2015. "Identifying the Effect of Changing the Policy Threshold in Regression Discontinuity Models," The Review of Economics and Statistics, MIT Press, vol. 97(5), pages 1081-1092, December.
    2. Vernon Henderson & Adam Storeygard & David N. Weil, 2011. "A Bright Idea for Measuring Economic Growth," American Economic Review, American Economic Association, vol. 101(3), pages 194-199, May.
    3. Sebastian Calonico & Matias D. Cattaneo & Rocío Titiunik, 2015. "Optimal Data-Driven Regression Discontinuity Plots," Journal of the American Statistical Association, Taylor & Francis Journals, vol. 110(512), pages 1753-1769, December.
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    Citations

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    Cited by:

    1. Isabelle Chort & Maëlys de la Rupelle, 2022. "Managing the impact of climate on migration: evidence from Mexico," Journal of Population Economics, Springer;European Society for Population Economics, vol. 35(4), pages 1777-1819, October.
    2. Giacomo Battiston & Gianmarco Daniele & Marco Le Moglie & Paolo Pinotti, 2022. "Fueling Organized Crime: The Mexican War on Drugs and Oil Thefts," "Marco Fanno" Working Papers 0286, Dipartimento di Scienze Economiche "Marco Fanno".
    3. Akbulut-Yuksel, Mevlude & Rahman, Muhammad Habibur & Ulubaşoğlu, Mehmet Ali, 2023. "Silver lining of the water: The role of government relief assistance in disaster recovery," European Journal of Political Economy, Elsevier, vol. 79(C).
    4. Ilan Noy & Toshihiro Okubo & Eric Strobl & Thomas Tveit, 2023. "The fiscal costs of earthquakes in Japan," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 30(5), pages 1225-1250, October.
    5. Braun, Alexander & Braun, Julia & Weigert, Florian, 2023. "Extreme weather risk and the cost of equity," CFR Working Papers 23-08, University of Cologne, Centre for Financial Research (CFR).
    6. Carla Morvan, 2022. "Municipalities' budgetary response to natural disasters," Working Papers halshs-03684732, HAL.
    7. Dormady, Noah C. & Rose, Adam & Roa-Henriquez, Alfredo & Morin, C. Blain, 2022. "The cost-effectiveness of economic resilience," International Journal of Production Economics, Elsevier, vol. 244(C).
    8. Daniele, Gianmarco & Le Moglie, Marco & Masera, Federico, 2023. "Pains, guns and moves: The effect of the U.S. opioid epidemic on Mexican migration," Journal of Development Economics, Elsevier, vol. 160(C).
    9. Ferreira, Susana, 2024. "Extreme Weather Events and Climate Change: Economic Impacts and Adaptation Policies," IZA Discussion Papers 16715, Institute of Labor Economics (IZA).
    10. Bashar, Omar & Mallick, Debdulal, 2021. "Frequency of Shocks, Resilience and Shock Persistence: Evidence from Natural Disasters," MPRA Paper 107517, University Library of Munich, Germany.

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    More about this item

    JEL classification:

    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • H12 - Public Economics - - Structure and Scope of Government - - - Crisis Management
    • H84 - Public Economics - - Miscellaneous Issues - - - Disaster Aid
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • R38 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Government Policy

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    1. Rules for Recovery: Impact of Indexed Disaster Funds on Shock Coping in Mexico (American Economic Journal: Applied Economics 2020) in ReplicationWiki

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