Are Private Defensive Expenditures against Storm Damages Affected by Public Programs and Natural Barriers? Evidence from the Coastal Areas of Bangladesh

Mahmud, Sakib and Barbier, Edward (2014): Are Private Defensive Expenditures against Storm Damages Affected by Public Programs and Natural Barriers? Evidence from the Coastal Areas of Bangladesh.

Abstract

This paper introduces a household model of private investment in storm protection under an endogenous risk framework to determine how ex-ante self-protection and ex-post self-insurance spending by coastal households to mitigate storm-inflicted damages are affected by the availability of public programs and the presence of a mangrove forest. The theoretical results show that ex-ante publicly constructed physical barriers and mangroves are complements to self-protection but substitutes to self-insurance. However, ex-post public disaster relief and rehabilitation programs are substitutes to self-protection but complements to self-insurance. Our empirical analysis of coastal households in Bangladesh impacted by Cyclone Sidr reveals partial support for crowding out and crowding in effects of public investments and programs. Households located in a mangrove protected area invest more in self-protection and less in self-insurance. Other controls, such as household socioeconomic characteristics, also influence and add a degree of complexity to the relationship.

• Item Type: MPRA Paper
• Language: English
• Keywords: self-protection; self-insurance; Cyclone Sidr; mangroves; Bangladesh
• Subjects: D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D81 - Criteria for Decision-Making under Risk and Uncertainty; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5 - Environmental Economics > Q51 - Valuation of Environmental Effects; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5 - Environmental Economics > Q54 - Climate ; Natural Disasters and Their Management ; Global Warming

References

http://www.sandeeonline.com/publicationdetails_disp.php?pcid=1&pid=899 http://opendocs.ids.ac.uk/opendocs/handle/123456789/4451#.VGozy2fZ3Kc

http://econpapers.repec.org/paper/sndwpaper/default1.htm

https://www.gwu.edu/~iiep/adaptation/docs/Sakib%20Mahmud,%20Are%20Private%20Defensive%20Expenditures%20Against%20Storm%20Damages%20Affected%20by%20Public%20Programs%20and%20Natural%20Barriers%20%28updated%29.pdf

http://www.webmeets.com/aere/2011/m/viewpaper.asp?pid=186