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Floods and Farmers: Evidence from the Field in Thailand

Listed author(s):
  • Sommarat Chantarat

    (Bank of Thailand)

  • Sirikarn Lertamphainont

    (Australian National University)

  • Krislert Samphantharak

    (University of California, San Diego)

This paper studies the impacts of the 2011 flood on preferences, subjective expectations, and behavioral choices among Thai rice-farming households. Our results show that experiencing the 2011 flood made farming households more risk averse, more impatient, and more altruistic, and that asset-poor farming households were more likely to be affected by the flood than better-off households. The flood also made households adjust upward their subjective expectations of future severe floods. After being hit by the 2011 flood, households lost their confidence in social safety nets, signifying the limitations of risk-sharing in the presence of covariate shocks. Middle-income households who were not prone to floods had higher expectations of public insurance following the flood. Mediating through the changes of preferences and subjective expectations, the flooded households were less likely to save money and engage in self-insurance mechanisms, as well as to invest in productive investments, but more likely to take out commercial crop insurance, especially those in the bottom and middle wealth groups. These findings shed light on the design of incentivecompatible safety nets and development interventions.

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File URL: https://www.pier.or.th/wp-content/uploads/2016/08/pier_dp_040.pdf
File Function: Published version, 2016
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Paper provided by Puey Ungphakorn Institute for Economic Research in its series PIER Discussion Papers with number 40..

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Length: 58 pages
Date of creation: Aug 2016
Date of revision: Aug 2016
Publication status: Published in PIER Discussion Paper Series
Handle: RePEc:pui:dpaper:40.
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  1. Lionel Page & David Savage & Benno Torgler, 2012. "Variation in Risk Seeking Behavior in a Natural Experiment on Large Losses Induced by a Natural Disaster," Working Papers 2012.54, Fondazione Eni Enrico Mattei.
  2. Eckel, Catherine C. & El-Gamal, Mahmoud A. & Wilson, Rick K., 2009. "Risk loving after the storm: A Bayesian-Network study of Hurricane Katrina evacuees," Journal of Economic Behavior & Organization, Elsevier, vol. 69(2), pages 110-124, February.
  3. Michael Callen & Mohammad Isaqzadeh & James D. Long & Charles Sprenger, 2014. "Violence and Risk Preference: Experimental Evidence from Afghanistan," American Economic Review, American Economic Association, vol. 104(1), pages 123-148, January.
  4. Shaik, Saleem & Coble, Keith H. & Knight, Thomas O. & Baquet, Alan E. & Patrick, George F., 2008. "Crop Revenue and Yield Insurance Demand: A Subjective Probability Approach," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 40(03), December.
  5. Marco Castillo & Michael Carter, 2011. "Behavioral Responses to Natural Disasters," Working Papers 1026, George Mason University, Interdisciplinary Center for Economic Science.
  6. Krislert Samphantharak, 2014. "Natural disasters and the economy: some recent experiences from Southeast Asia," Asian-Pacific Economic Literature, Asia Pacific School of Economics and Government, The Australian National University, vol. 28(2), pages 33-51, November.
  7. Ruth Vargas Hill, 2009. "Using Stated Preferences and Beliefs to Identify the Impact of Risk on Poor Households," Journal of Development Studies, Taylor & Francis Journals, vol. 45(2), pages 151-171.
  8. Paul Raschky & Reimund Schwarze & Manijeh Schwindt & Ferdinand Zahn, 2013. "Uncertainty of Governmental Relief and the Crowding out of Flood Insurance," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 54(2), pages 179-200, February.
  9. Callen, Michael, 2015. "Catastrophes and time preference: Evidence from the Indian Ocean Earthquake," Journal of Economic Behavior & Organization, Elsevier, vol. 118(C), pages 199-214.
  10. Delavande, Adeline & Giné, Xavier & McKenzie, David, 2011. "Measuring subjective expectations in developing countries: A critical review and new evidence," Journal of Development Economics, Elsevier, vol. 94(2), pages 151-163, March.
  11. Maarten J. Voors & Eleonora E. M. Nillesen & Philip Verwimp & Erwin H. Bulte & Robert Lensink & Daan P. Van Soest, 2012. "Violent Conflict and Behavior: A Field Experiment in Burundi," American Economic Review, American Economic Association, vol. 102(2), pages 941-964, April.
  12. Page, Lionel & Savage, David A. & Torgler, Benno, 2014. "Variation in risk seeking behaviour following large losses: A natural experiment," European Economic Review, Elsevier, vol. 71(C), pages 121-131.
  13. Alessandra Cassar & Pauline Grosjean & Sam Whitt, 2013. "Legacies of violence: trust and market development," Journal of Economic Growth, Springer, vol. 18(3), pages 285-318, September.
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