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

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  • Yanos Zylberberg

    (PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - École des Hautes Études en Sciences Sociales (EHESS) - École des Ponts ParisTech (ENPC) - École normale supérieure [ENS] - Paris - Institut national de la recherche agronomique (INRA), EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris)

Abstract

Natural disasters trigger large inequalities between affected households and the rest of the community. The extent to which villages compensate for these shocks allegedly depends on the pressure imposed by the group of needy families. I model two major threats to redistribution - (i) the emergence of acoalition of winners willing to shy away from redistributing to their peers and (ii) the initial fractionalization of the community. Matching data on a wave of tropical typhoons with a panel household survey in Vietnam, I find less redistribution in villages where needy families are in the minority. Whereas 17 cents on average are covered through informal transfers for a relative income loss of $1, access to liquidity falls below 10 cents when heavily affected households are isolated in the commune. In line with the existing literature, minorities participate less in the resources reallocation. Despite these barriers to full insurance, risk-sharing through informal transfers is still economically significant. This result is related with the findings that communities having suffered important trauma show greater signs of resilience and cohesiveness.

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Paper provided by HAL in its series PSE Working Papers with number halshs-00564941.

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Date of creation: Oct 2010
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Handle: RePEc:hal:psewpa:halshs-00564941

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Keywords: natural disasters ; informal risk-sharing ; social insurance ; altruism;

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  1. Mark Rosenzweig & Andrew D. Foster, 1995. "Imperfect Commitment, Altruism, and the Family: Evidence from Transfer Behavior in Low-Income Rural Areas," Home Pages _075, University of Pennsylvania.
  2. Marcel Fafchamps & Flore Gubert, 2007. "Risk Sharing and Network Formation," Economics Series Working Papers GPRG-WPS-067, University of Oxford, Department of Economics.
  3. Ruben Durante, 2010. "Risk, Cooperation and the Economic origins of social Trust: an empirical Investigation," Sciences Po publications info:hdl:2441/eu4vqp9ompq, Sciences Po.
  4. Garance Genicot & Debraj Ray, 2003. "Group Formation in Risk--Sharing Arrangements," Review of Economic Studies, Wiley Blackwell, vol. 70(1), pages 87-113, January.
  5. James H. Stock & Motohiro Yogo, 2002. "Testing for Weak Instruments in Linear IV Regression," NBER Technical Working Papers 0284, National Bureau of Economic Research, Inc.
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  7. Ethan Ligon & Jonathan P. Thomas & Tim Worrall, 2002. "Informal Insurance Arrangements with Limited Commitment: Theory and Evidence from Village Economies," Review of Economic Studies, Oxford University Press, vol. 69(1), pages 209-244.
  8. Bloch, Francis & Genicot, Garance & Ray, Debraj, 2008. "Informal insurance in social networks," Journal of Economic Theory, Elsevier, vol. 143(1), pages 36-58, November.
  9. Francis Bloch & Garance Genicot & Debraj Ray, 2007. "Reciprocity in Groups and the Limits to Social Capital," American Economic Review, American Economic Association, vol. 97(2), pages 65-69, May.
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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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