Abstract
The existing literature concludes that natural disasters have cataclysmic effects on the economic well-being of people. But how natural disasters shape psychological behavior is still ambiguous. In this paper, we study the effects of a natural disaster on individuals' interpersonal trust in Pakistan. By exploiting a nationally representative cross-sectional survey and combining it with the district-level geospatial data on floods, we observe the positive and statistically significant impact of 2010-2011 flooding on the reported levels of trust, after 23-36months of the exposure. Quantitatively, a 1% increase in district's exposure to flooding increases interpersonal trust by 5%, after controlling for individual and district level characteristics. Our empirical strategy enables us to control for various geographical characteristics to counter the concerns regarding the otherwise exogenous natural experiment. Next, our results suggest that flooding heterogeneously affects individuals who are male, live in urban areas, and have higher educational attainment. These findings remain robust to different sensitivity and robustness checks.
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