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Do tropical typhoons smash community ties? Theory and Evidence from Vietnam

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  • Yanos Zylberberg

    ()
    (Paris School of Economics)

Abstract

In rural economies, risk-sharing arrangements through networks of relatives and friends are common. Monitoring issues seem to impede the development of informal insurance mechanisms at higher level. As such, after a large and covariate shock, the prerequisites under which informal arrangements are feasible might refrain the community to redistribute efficiently resources between sub-groups. I rely on a model of imperfect commitment to derive predictions on the sustainability of risk-sharing arrangements in the aftermath of extreme events at a higher level than usually considered by the literature. I then test these predictions on a representative panel data in Vietnam, using tropical typhoons trails and wind structures. The estimation of a structural equation derived by the theory is compatible with a model of imperfect commitment where the aftermath of natural disasters is associated with stronger enforcement mechanisms at commune level. As such, between 30 and 55 cents are covered through informal transfers at hamlet level for a relative income loss of $ 1.The influence of pre-disaster social norms and existing ties to prevent disruption of integrative mechanisms in the community gives support to this interpretation. Finally, communities having already suffered important trauma show greater signs of resilience.

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Bibliographic Info

Paper provided by Development and Policies Research Center (DEPOCEN), Vietnam in its series Working Papers with number 11.

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Length: 45 pages
Date of creation: 2010
Date of revision:
Handle: RePEc:dpc:wpaper:1110

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Keywords: Natural disasters; informal insurance; coordination; imperfect commitment.;

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  1. Ruben Durante, 2010. "Risk, Cooperation and the Economic origins of social Trust: an empirical Investigation," Sciences Po publications info:hdl:2441/eu4vqp9ompq, Sciences Po.
  2. Garance Genicot & Debraj Ray, 2003. "Group Formation in Risk--Sharing Arrangements," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 70(1), pages 87-113, January.
  3. Ligon, Ethan & Thomas, Jonathan P & Worrall, Tim, 2002. "Informal Insurance Arrangements with Limited Commitment: Theory and Evidence from Village Economies," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 69(1), pages 209-44, January.
  4. Francis Bloch & Garance Genicot & Debraj Ray, 2007. "Reciprocity in Groups and the Limits to Social Capital," American Economic Review, American Economic Association, American Economic Association, vol. 97(2), pages 65-69, May.
  5. Marcel Fafchamps & Flore Gubert, 2007. "Risk Sharing and Network Formation," American Economic Review, American Economic Association, American Economic Association, vol. 97(2), pages 75-79, May.
  6. Francis Bloch & Garance Genicot, 2005. "Informal Insurance in Social Networks," 2005 Meeting Papers, Society for Economic Dynamics 156, Society for Economic Dynamics.
  7. Mark Rosenzweig & Andrew D. Foster, 1995. "Imperfect Commitment, Altruism, and the Family: Evidence from Transfer Behavior in Low-Income Rural Areas," Home Pages, University of Pennsylvania _075, University of Pennsylvania.
  8. James H. Stock & Motohiro Yogo, 2002. "Testing for Weak Instruments in Linear IV Regression," NBER Technical Working Papers, National Bureau of Economic Research, Inc 0284, National Bureau of Economic Research, Inc.
  9. Amemiya, Takeshi, 1975. "The nonlinear limited-information maximum- likelihood estimator and the modified nonlinear two-stage least-squares estimator," Journal of Econometrics, Elsevier, Elsevier, vol. 3(4), pages 375-386, November.
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Cited by:
  1. Eva Deuchert & Christina Felfe, 2013. "The Tempest: Natural Disasters, Early Shocks and Children's Short- and Long-Run Development," CESifo Working Paper Series 4168, CESifo Group Munich.
  2. Ginger Turner & Farah Said & Uzma Afzal, 2014. "Microinsurance Demand After a Rare Flood Event: Evidence From a Field Experiment in Pakistan," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan, vol. 39(2), pages 201-223, April.

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