Natural disasters and economic development: Microeconometric evidence from Nepal's 2015 earthquake
Final Report Abstract
This project studies effects of Nepal's 2015 earthquake and thus contributes to an understanding of the relationship between natural disasters and economic development. We study the role of discrimination and in-group biases in the allocation of public funds by community-based committees. Specifically, we investigate the effect of caste hierarchies on the amount of emergency aid given to households after the 2015 earthquake in Nepal. Local committees allocated aid immediately after the earthquake, and -officially- the amount of aid was a function of the magnitude of the housing damage. To identify discrimination and in-group favoritism in this context, we utilize rich data on house characteristics and housing damage and exploit exogenous variation in earthquake intensity. We first provide evidence for caste-based discrimination by these committees: Upper caste households received more aid than lower caste households. Second, we find in-group favoritism among upper caste households: Upper caste households received more aid if individuals from their own (upper) caste were involved in the allocation of aid. In contrast, lower caste households did not benefit from the presence of their own (lower) caste representatives in aid allocation committees. The results highlight the importance of social hierarchies in the study of favoritism and contribute to a better understanding of social structure for the implementation of development policy. Further work analyzes the effect of community-based forest user groups on deforestation. Specifically, we investigate whether these community-based institutions lead to a reduction in forest loss when there is a sudden, large increase in demand for forest resources. To this end, we combine remote sensing data with detailed administrative data on community-based forest user groups and exploit spatial variation in the intensity of the 2015 earthquake in Nepal. We first show that the earthquake led to a significant increase in deforestation in the highly affected areas relative to the less affected areas. In our main finding, we then show that the earthquake-induced increase in deforestation is significantly lower in locations with forest user groups. Disasters can exogenously increase pressure on resources, weaken the functioning of institutions, and affect the enforcement of rules. As such, they can be seen as a lens through which one can analyze the possible effects of climate change, migration, and population growth on institutions. In the coming years, population growth and climate change will increase the pressure on forests, in Nepal and globally, further beyond already high levels. Therefore, the question of resilience will continue to increase in importance. In the study of deforestation, our findings show that promoting community-based institutions can be an effective policy for conserving natural resources even in times of increased pressure on resources and institutions. On the other hand, the study of aid distribution shows that community-based institutions are also vulnerable to favoritism and discrimination. These findings contribute to a more nuanced understanding of the role of institutions in the context of economic development and natural disasters.
Publications
- Natural Disasters, Discrimination, and Favoritism: Quasi‐Experimental Evidence from the 2015 Earthquake in Nepal. Journal of Public Economics
Pathak, Prakash, and Matthias Schündeln
(See online at https://doi.org/10.1016/j.jpubeco.2022.104607)
