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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

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  • Mahmud, Sakib
  • Barbier, Edward B.

Abstract

This paper introduces a household model of private investment in storm protection under an endogenous risk framework to determine how defensive self-protection and self-insurance expenditures 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 publicly constructed physical barriers and mangroves encourage self-protection but discourage self-insurance expenditures. However, public disaster relief and rehabilitation programs lead to the crowding-out of self-protection but the crowding-in of self-insurance. Our empirical analysis of coastal households in Bangladesh impacted by Cyclone Sidr reveals partial support for the 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 socio-economic characteristics, also influence and add a degree of complexity to the relationship.

Suggested Citation

  • Mahmud, Sakib & Barbier, Edward B., 2016. "Are private defensive expenditures against storm damages affected by public programs and natural barriers? Evidence from the coastal areas of Bangladesh," Environment and Development Economics, Cambridge University Press, vol. 21(6), pages 767-788, December.
  • Handle: RePEc:cup:endeec:v:21:y:2016:i:06:p:767-788_00
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    Cited by:

    1. 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.

    More about this item

    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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