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Do Natural Disasters Change Savings and Employment Choices? Evidence from Bangladesh and Pakistan

Author

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  • Eskander, Shaikh M.S.U.

    (London School of Economics)

  • Fankhauser, Samuel

    (London School of Economics)

  • Jha, Shikha

    (Asian Development Bank)

Abstract

We investigate the economic response of households to natural disasters in Bangladesh and Pakistan. In particular, we explore to what extent households adjust their income and employment strategies and savings in response to exposure to floods and storms. Using two unique panel datasets, we find evidence of autonomous adjustments in both countries. In Bangladesh, farmers move away from farm to nonfarm employment as a coping strategy to tackle immediate reductions in their total household income from exposure to disasters, whereas nonfarmers increase their off-farm labor supply. Such adjustments in employment strategies are stronger among the storm-affected households than the flood-affected households. On the other hand, although farmers in Pakistan move away from agriculture as an immediate response to disasters, they eventually come back to agriculture within a year of disaster exposure. We also identify that such adjustments in employment and income strategies help farmers to overcome the immediate losses from disaster exposure as the disasteraffected households from both Bangladesh and Pakistan exhibit at least no decrease in their savings behavior. We discuss policy implications in terms of developing nonfarm employment opportunities to reduce the future harms of disaster and financing economic migration to reduce income vulnerability.

Suggested Citation

  • Eskander, Shaikh M.S.U. & Fankhauser, Samuel & Jha, Shikha, 2016. "Do Natural Disasters Change Savings and Employment Choices? Evidence from Bangladesh and Pakistan," ADB Economics Working Paper Series 505, Asian Development Bank.
  • Handle: RePEc:ris:adbewp:0505
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    References listed on IDEAS

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    4. Fankhauser, Samuel & S.J. Tol, Richard, 2005. "On climate change and economic growth," Resource and Energy Economics, Elsevier, vol. 27(1), pages 1-17, January.
    5. Robert Jensen, 2000. "Agricultural Volatility and Investments in Children," American Economic Review, American Economic Association, vol. 90(2), pages 399-404, May.
    6. Shaikh Eskander & Edward Barbier, 2016. "Adaptation to natural disasters through the agricultural land rental market: evidence from Bangladesh," GRI Working Papers 236, Grantham Research Institute on Climate Change and the Environment.
    7. V. Smith & Jared Carbone & Jaren Pope & Daniel Hallstrom & Michael Darden, 2006. "Adjusting to natural disasters," Journal of Risk and Uncertainty, Springer, vol. 33(1), pages 37-54, September.
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    Cited by:

    1. Crick, Florence & Eskander, Shaikh M.S.U. & Fankhauser, Sam & Diop, Mamadou, 2018. "How do African SMEs respond to climate risks? Evidence from Kenya and Senegal," World Development, Elsevier, vol. 108(C), pages 157-168.

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    More about this item

    Keywords

    Bangladesh; income; natural disasters; Pakistan; savings;
    All these keywords.

    JEL classification:

    • D13 - Microeconomics - - Household Behavior - - - Household Production and Intrahouse Allocation
    • D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy; Intergenerational Transfers
    • Q15 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Land Ownership and Tenure; Land Reform; Land Use; Irrigation; Agriculture and Environment
    • Q24 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Land
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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