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Are Private Defensive Expenditures against Storm Damages Affected by Public Programs and Natural Barriers? Evidence from the Coastal Areas of Bangladesh

Author

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  • Mahmud, Sakib
  • Barbier, Edward

Abstract

This paper introduces a household model of private investment in storm protection under an endogenous risk framework to determine how ex-ante self-protection and ex-post self-insurance spending by coastal households to mitigate storm-inflicted damages are affected by the availability of public programs and the presence of a mangrove forest. The theoretical results show that ex-ante publicly constructed physical barriers and mangroves are complements to self-protection but substitutes to self-insurance. However, ex-post public disaster relief and rehabilitation programs are substitutes to self-protection but complements to self-insurance. Our empirical analysis of coastal households in Bangladesh impacted by Cyclone Sidr reveals partial support for crowding out and crowding in effects of public investments and programs. Households located in a mangrove protected area invest more in self-protection and less in self-insurance. Other controls, such as household socioeconomic characteristics, also influence and add a degree of complexity to the relationship.

Suggested Citation

  • Mahmud, Sakib & Barbier, Edward, 2014. "Are Private Defensive Expenditures against Storm Damages Affected by Public Programs and Natural Barriers? Evidence from the Coastal Areas of Bangladesh," MPRA Paper 60001, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:60001
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    File URL: https://mpra.ub.uni-muenchen.de/60001/1/MPRA_paper_60001.pdf
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    Cited by:

    1. Chloe H. Lucas & Kate I. Booth & Carolina Garcia, 2021. "Insuring homes against extreme weather events: a systematic review of the research," Climatic Change, Springer, vol. 165(3), pages 1-21, April.
    2. Sakib Mahmud & Gazi Mainul Hassan, 2014. "Consequences of Public Programs and Private Transfers on Household Investment in Storm Protection," Working Papers in Economics 14/01, University of Waikato.
    3. Edward B. Barbier & Angela Cindy Emefa Mensah & Michelan Wilson, 2023. "Valuing the Environment as Input, Ecosystem Services and Developing Countries," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 84(3), pages 677-694, March.
    4. Juan Robalino & Katrina Mullan & Matías Piaggio & Marisol Guzmán, 2023. "Does Green Infrastructure Work? Precipitation, Protected Areas, Floods and Landslides," Economics of Disasters and Climate Change, Springer, vol. 7(3), pages 457-482, November.
    5. Robalino, Juan & Mullan, Katrina & Piaggio, Matías & Guzmán, Marisol, 2023. "Does Green Infrastructure Work?: Precipitation, Protected Areas, Floods and Landslides," IDB Publications (Working Papers) 13166, Inter-American Development Bank.

    More about this item

    Keywords

    self-protection; self-insurance; Cyclone Sidr; mangroves; Bangladesh;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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