IDEAS home Printed from https://ideas.repec.org/p/gat/wpaper/2021.html
   My bibliography  Save this paper

Hiding Behind the Veil of Ashes: Social Capital in the Wake of Natural Disasters

Author

Listed:
  • Victor Stéphane

    () (Univ. Lyon, UJM Saint-Etienne, GATE UMR 5824, F-42023 Saint-Etienne, France)

Abstract

This paper investigates the impact of natural disasters on social capital. By heterogeneously affecting people in a community, natural disasters create a temporary information asymmetry on their post-disaster income. Using an original dataset collected in rural Ecuador, we provide suggestive evidence that households use this asymmetric information to pretend to be poorer than they actually are, in order to escape from solidarity mechanisms in the aftermath of the shock. The magnitude of this effect decreases with the level of wealth inequality in the community and vanishes in the most unequal communities where bilateral cooperation is rather fostered.

Suggested Citation

  • Victor Stéphane, 2020. "Hiding Behind the Veil of Ashes: Social Capital in the Wake of Natural Disasters," Working Papers 2021, Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon.
  • Handle: RePEc:gat:wpaper:2021
    as

    Download full text from publisher

    File URL: ftp://ftp.gate.cnrs.fr/RePEc/2020/2021.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Di Falco, Salvatore & Feri, Francesco & Pin, Paolo & Vollenweider, Xavier, 2018. "Ties that bind: Network redistributive pressure and economic decisions in village economies," Journal of Development Economics, Elsevier, vol. 131(C), pages 123-131.
    2. David A. Fleming & Alberto Chong & Hern�n D. Bejarano, 2014. "Trust and Reciprocity in the Aftermath of Natural Disasters," Journal of Development Studies, Taylor & Francis Journals, vol. 50(11), pages 1482-1493, November.
    3. 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.
    4. Alberto Alesina & Eliana La Ferrara, 2000. "Participation in Heterogeneous Communities," The Quarterly Journal of Economics, Oxford University Press, vol. 115(3), pages 847-904.
    5. Masahiro Shoji, 2018. "Incentive for risk sharing and trust formation: experimental and survey evidence from Bangladesh," Oxford Economic Papers, Oxford University Press, vol. 70(4), pages 1062-1083.
    6. Timothy G. Conley & Christopher R. Udry, 2010. "Learning about a New Technology: Pineapple in Ghana," American Economic Review, American Economic Association, vol. 100(1), pages 35-69, March.
    7. Becchetti, Leonardo & Castriota, Stefano & Conzo, Pierluigi, 2017. "Disaster, Aid, and Preferences: The Long-run Impact of the Tsunami on Giving in Sri Lanka," World Development, Elsevier, vol. 94(C), pages 157-173.
    8. Orazio Attanasio & Abigail Barr & Juan Camilo Cardenas & Garance Genicot & Costas Meghir, 2012. "Risk Pooling, Risk Preferences, and Social Networks," American Economic Journal: Applied Economics, American Economic Association, vol. 4(2), pages 134-167, April.
    9. Leigh, Andrew, 2006. "Does equality lead to fraternity?," Economics Letters, Elsevier, vol. 93(1), pages 121-125, October.
    10. Townsend, Robert M, 1994. "Risk and Insurance in Village India," Econometrica, Econometric Society, vol. 62(3), pages 539-591, May.
    11. Oriana Bandiera & Imran Rasul, 2006. "Social Networks and Technology Adoption in Northern Mozambique," Economic Journal, Royal Economic Society, vol. 116(514), pages 869-902, October.
    12. Siwan Anderson & Jean-Marie Baland, 2002. "The Economics of Roscas and Intrahousehold Resource Allocation," The Quarterly Journal of Economics, Oxford University Press, vol. 117(3), pages 963-995.
    13. Cynthia Kinnan & Robert Townsend, 2012. "Kinship and Financial Networks, Formal Financial Access, and Risk Reduction," American Economic Review, American Economic Association, vol. 102(3), pages 289-293, May.
    14. Fafchamps, Marcel & Lund, Susan, 2003. "Risk-sharing networks in rural Philippines," Journal of Development Economics, Elsevier, vol. 71(2), pages 261-287, August.
    15. Manuela Angelucci & Giacomo De Giorgi, 2009. "Indirect Effects of an Aid Program: How Do Cash Transfers Affect Ineligibles' Consumption?," American Economic Review, American Economic Association, vol. 99(1), pages 486-508, March.
    16. Jing Cai & Alain De Janvry & Elisabeth Sadoulet, 2015. "Social Networks and the Decision to Insure," American Economic Journal: Applied Economics, American Economic Association, vol. 7(2), pages 81-108, April.
    17. Hideki Toya & Mark Skidmore, 2014. "Do Natural Disasters Enhance Societal Trust?," Kyklos, Wiley Blackwell, vol. 67(2), pages 255-279, May.
    18. David Roodman & James G. MacKinnon & Morten Ørregaard Nielsen & Matthew D. Webb, 2019. "Fast and wild: Bootstrap inference in Stata using boottest," Stata Journal, StataCorp LP, vol. 19(1), pages 4-60, March.
    19. A. Colin Cameron & Douglas L. Miller, 2015. "A Practitioner’s Guide to Cluster-Robust Inference," Journal of Human Resources, University of Wisconsin Press, vol. 50(2), pages 317-372.
    20. Marco Castillo & Michael Carter, 2011. "Behavioral Responses to Natural Disasters," Working Papers 1026, George Mason University, Interdisciplinary Center for Economic Science.
    21. Siwan Anderson & Jean-Marie Baland, 2002. "The Economics of Roscas and Intrahousehold Resource Allocation," The Quarterly Journal of Economics, Oxford University Press, vol. 117(3), pages 963-995.
    22. Lisa Cameron & Manisha Shah, 2015. "Risk-Taking Behavior in the Wake of Natural Disasters," Journal of Human Resources, University of Wisconsin Press, vol. 50(2), pages 484-515.
    23. Islam, Asad & Nguyen, Chau, 2018. "Do networks matter after a natural disaster? A study of resource sharing within an informal network after Cyclone Aila," Journal of Environmental Economics and Management, Elsevier, vol. 90(C), pages 249-268.
    24. Cassar, Alessandra & Healy, Andrew & von Kessler, Carl, 2017. "Trust, Risk, and Time Preferences After a Natural Disaster: Experimental Evidence from Thailand," World Development, Elsevier, vol. 94(C), pages 90-105.
    25. Manuela Angelucci & Giacomo de Giorgi & Imran Rasul & Marcos A. Rangel, 2010. "Insurance and Investment within Family Networks," Working Papers id:2649, eSocialSciences.
    26. Alam, Shamma Adeeb & Pörtner, Claus C., 2018. "Income shocks, contraceptive use, and timing of fertility," Journal of Development Economics, Elsevier, vol. 131(C), pages 96-103.
    27. Tahir Andrabi & Jishnu Das, 2017. "In Aid We Trust: Hearts and Minds and the Pakistan Earthquake of 2005," The Review of Economics and Statistics, MIT Press, vol. 99(3), pages 371-386, July.
    28. Adolfo Morrone & Noemi Tontoranelli & Giulia Ranuzzi, 2009. "How Good is Trust?: Measuring Trust and its Role for the Progress of Societies," OECD Statistics Working Papers 2009/3, OECD Publishing.
    29. Hideki Toya & Mark Skidmore, 2014. "Do Natural Disasters Enhance Societal Trust?," Kyklos, Wiley Blackwell, vol. 67(2), pages 255-279, May.
    30. Buggle, Johannes & Durante, Ruben, 2017. "Climate Risk, Cooperation, and the Co-Evolution of Culture and Institutions," CEPR Discussion Papers 12380, C.E.P.R. Discussion Papers.
    31. David McKenzie, 2005. "Measuring inequality with asset indicators," Journal of Population Economics, Springer;European Society for Population Economics, vol. 18(2), pages 229-260, June.
    32. Abigail Barr, 2003. "Trust and expected trustworthiness: experimental evidence from zimbabwean villages," Economic Journal, Royal Economic Society, vol. 113(489), pages 614-630, July.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Victor Stephane, 2020. "Hiding Behind the Veil of Ashes: Social Capital in the Wake of Natural Disasters," Working Papers halshs-02901506, HAL.
    2. Di Falco, Salvatore & Feri, Francesco & Pin, Paolo & Vollenweider, Xavier, 2018. "Ties that bind: Network redistributive pressure and economic decisions in village economies," Journal of Development Economics, Elsevier, vol. 131(C), pages 123-131.
    3. Asadul Islam & C. Matthew Leister & Minhaj Mahmud & Paul A. Raschky, 2020. "Natural disaster and risk-sharing behavior: Evidence from rural Bangladesh," Journal of Risk and Uncertainty, Springer, vol. 61(1), pages 67-99, August.
    4. Juan M. Gallego & Mariapia Mendola, 2013. "Labour Migration and Social Networks Participation in Southern Mozambique," Economica, London School of Economics and Political Science, vol. 80(320), pages 721-759, October.
    5. Jonathan Robinson, 2012. "Limited Insurance within the Household: Evidence from a Field Experiment in Kenya," American Economic Journal: Applied Economics, American Economic Association, vol. 4(4), pages 140-164, October.
    6. Bandiera, Oriana & Gulesci, Selim & Rasul, Imran & Burgess, Robin, 2009. "Community networks and poverty reduction programmes: evidence from Bangladesh," LSE Research Online Documents on Economics 58054, London School of Economics and Political Science, LSE Library.
    7. Vojtech Bartos, 2016. "Seasonal Scarcity and Sharing Norms," CERGE-EI Working Papers wp557, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    8. Belhaj, Mohamed & Deroïan, Frédéric, 2012. "Risk taking under heterogenous revenue sharing," Journal of Development Economics, Elsevier, vol. 98(2), pages 192-202.
    9. Islam, Asad & Nguyen, Chau, 2018. "Do networks matter after a natural disaster? A study of resource sharing within an informal network after Cyclone Aila," Journal of Environmental Economics and Management, Elsevier, vol. 90(C), pages 249-268.
    10. Hernan Bejarano & Joris Gillet & Ismael Rodriguez-Lara, 2020. "Trust and Trustworthiness After Negative Random Shocks," Working Papers 20-25, Chapman University, Economic Science Institute.
    11. Felipe Kast & Dina Pomeranz, 2013. "Saving More to Borrow Less: Experimental Evidence from Access to Formal Savings Accounts in Chile," Harvard Business School Working Papers 14-001, Harvard Business School, revised Jun 2014.
    12. DELPIERRE Matthieu & VERHEYDEN Bertrand & WEYNANTS Stéphanie, 2011. "On the interaction between risk-taking and risk-sharing under farm household wealth heterogeneity," LISER Working Paper Series 2011-35, LISER.
    13. Karlan, Dean & Morduch, Jonathan, 2010. "Access to Finance," Handbook of Development Economics, in: Dani Rodrik & Mark Rosenzweig (ed.), Handbook of Development Economics, edition 1, volume 5, chapter 0, pages 4703-4784, Elsevier.
    14. Aida, Takeshi, 2015. "Spatial vs. Social Network Effects in Risk Sharing," Working Papers 89, JICA Research Institute.
    15. Rahman, Muhammad Habibur & Lee, Grace H.Y. & Shabnam, Nourin & Jayasinghe, Susantha, 2020. "Weathering trust," Journal of Economic Behavior & Organization, Elsevier, vol. 178(C), pages 449-473.
    16. Grimm, Michael & Hartwig, Renate & Lay, Jann, 2017. "Does forced solidarity hamper investment in small and micro enterprises?," Journal of Comparative Economics, Elsevier, vol. 45(4), pages 827-846.
    17. Sommarat Chantarat & Christopher Barrett, 2012. "Social network capital, economic mobility and poverty traps," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 10(3), pages 299-342, September.
    18. Pamela Jakiela & Owen Ozier, 2016. "Does Africa Need a Rotten Kin Theorem? Experimental Evidence from Village Economies," Review of Economic Studies, Oxford University Press, vol. 83(1), pages 231-268.
    19. Xiao Yu Wang, 2014. "Risk Sorting, Portfolio Choice, and Endogenous Informal Insurance," NBER Working Papers 20429, National Bureau of Economic Research, Inc.
    20. Flory, Jeffrey A., 2018. "Formal finance and informal safety nets of the poor: Evidence from a savings field experiment," Journal of Development Economics, Elsevier, vol. 135(C), pages 517-533.

    More about this item

    Keywords

    Social Capital; Moral Hazard; Asymmetric Information; Volcanic Eruptions; Ecuador;
    All these keywords.

    JEL classification:

    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gat:wpaper:2021. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Nelly Wirth). General contact details of provider: http://edirc.repec.org/data/gateefr.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.