Natural Disasters and Economic Dynamics : Evidence from the Kerala Floods
Exceptionally high rainfall in the Indian state of Kerala caused major flooding in 2018. This paper estimates the short-run causal impact of the disaster on the economy, using a difference-in-difference approach. Monthly nighttime light intensity,...
| Main Authors: | , , |
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| Format: | Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC:
2022
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/099822206132239289/IDU0beef79560a37d04887082fb008ee88012ac5 http://hdl.handle.net/10986/37545 |
| Summary: | Exceptionally high rainfall in the
Indian state of Kerala caused major flooding in 2018. This
paper estimates the short-run causal impact of the disaster
on the economy, using a difference-in-difference approach.
Monthly nighttime light intensity, a proxy for aggregate
economic activity, suggests that activity declined for three
months during the disaster but boomed subsequently.
Automated teller machine transactions, a proxy for consumer
demand, declined and credit disbursal increased, with
households borrowing more for housing and less for
consumption. In line with other results, both household
income and expenditure declined during the floods. Despite a
strong wage recovery after the floods, spending remained
lower relative to the unaffected districts. The paper argues
that increased labor demand due to reconstruction efforts
increased wages after the floods and provides corroborating
evidence: (i) rural labor markets tightened, (ii) poorer
households benefited more, and (iii) wages increased most
where government relief was strongest. The findings confirm
the presence of interesting economic dynamics during and
right after natural disasters that remain in the shadow when
analyzed with annual data. |
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