Does Disaster Change Income and Wealth Distribution Toward Extremity of Inequality and Poverty? Analysis of Flood and Landslides in the Vulnerable Locations of Nepal

Natural disaster is a key exogenous driver to unpredictable risk of uncertainty and cost of economic loss. GDP loss at national economy and welfare loss at household level in the world are major costs of natural disasters. The cost that is a burden to households could change on income distribution and household income vertically and horizontally and then their livelihood and welfare. This relationship makes a curiosity of whether natural disaster could change income distribution at the household level in developing countries, where socio-economic vulnerable groups exist so that an alternative policy option can be explored to minimize such bad effects on socio-economic vulnerable groups and their livelihood and welfare. This article measures empirically the income distribution effects of natural disaster at household level based on primary data sets collected through a household survey in Sot Khola (stream) water basin using the Gini coefficient method. As a reference line, inequality and poverty levels are employed. Comprehensive and comparative analytical tools are used for testing the above research question based on two periodic data sets and information. As a result, the water shed areas had higher inequality and poverty level than national inequality line (0.33) before natural disaster. The residents were socio-economically and geographically vulnerable. The natural disaster damaged heavily tangible and nontangible assets, houses, household utensils, documents, dresses, valuable indigenous materials, emotions, and food grains. Thus the vulnerable households lost their assets and food grains in the disaster. Its distribution was acute at higher and lower altitude watershed areas and households than middle areas and households. In general, higher altitude watershed areas and households were more vulnerable than middle and then lower altitude watershed areas and households. Such acuteness of economic loss redistributed their inequality and poverty level in such a way. Thus, the vulnerable population became more vulnerable and the nonvulnerable population with their adaptive capacity became less vulnerable. Thus, the natural disaster has a negative income distribution effect at household level, particularly for vulnerable households with expansion of inequality and poverty.