Working Paper: NBER ID: w31102
Authors: Nicholas Ingwersen; Elizabeth Frankenberg; Duncan Thomas
Abstract: The impact of exposure to a major unanticipated natural disaster on the evolution of survivors’ attitudes toward risk is examined, exploiting plausibly exogenous variation in exposure to the 2004 Indian Ocean tsunami in combination with rich population-representative longitudinal survey data spanning the five years after the tsunami. Respondents chose among pairs of hypothetical income streams. Those directly exposed to the tsunami made choices consistent with greater willingness to take on risk relative to those not directly exposed to the tsunami. These differences are short-lived: starting a year later, there is no evidence of differences in willingness to take on risk between the two groups. These conclusions hold for tsunami-related exposures measured at the individual and community level. Apparently, tsunami survivors were inclined to assume greater financial risk in the short-term while rebuilding their lives after the disaster.
Keywords: risk aversion; natural disaster; tsunami; financial risk; longitudinal survey
JEL Codes: D12; D81; O12; Q54
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Tsunami exposure (H84) | increased willingness to take risks (G41) |
| increased willingness to take risks (G41) | changes in risk attitudes (D11) |
| Tsunami exposure (H84) | changes in risk attitudes (D11) |
| increased willingness to take risks (G41) | return to baseline risk attitudes (D81) |