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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.

Suggested Citation

  • Yanos Zylberberg, 2010. "Do tropical typhoons smash community ties? Theory and Evidence from Vietnam," Working Papers 11, Development and Policies Research Center (DEPOCEN), Vietnam.
  • Handle: RePEc:dpc:wpaper:1110
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    References listed on IDEAS

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    1. Bloch, Francis & Genicot, Garance & Ray, Debraj, 2008. "Informal insurance in social networks," Journal of Economic Theory, Elsevier, pages 36-58.
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    Cited by:

    1. Huu Chi Nguyen & Christophe Nordman, 2014. "Household entrepreneurship and social networks:panel data evidence from Vietnam," Working Papers DT/2014/22, DIAL (Développement, Institutions et Mondialisation).
    2. Tiago Freire & J. Vernon Henderson & Ari Kuncoro, 2017. "Volunteerism after the Tsunami: The Effects of Democratization," World Bank Economic Review, World Bank Group, pages 176-195.
    3. Huu Chi Nguyen & Christophe Jalil Nordman, 2017. "Household Entrepreneurship and Social Networks: Panel Data Evidence from Vietnam," Working Papers hal-01619799, HAL.
    4. 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.
    5. 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;The Geneva Association, vol. 39(2), pages 201-223, April.

    More about this item

    Keywords

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

    JEL classification:

    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification

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