Behavioral Response to Natural Disaster

Abstract

The issue of natural disasters became increasingly important primarily due to the unprecedented ecological challenges we are facing right now, which can bring severe outcomes on the global scale. Natural disasters have cost the global economy US$4,200 billion since 1980 (Munich Re Group 2015). Given the fact that natural disasters occur mostly in developing countries, we can assume that the issue is particularity important for the developing economies. The effect of natural disasters has proven itself to be long lasting, spreading to such crucial for development dimensions as savings and investments, innovation and entrepreneurship, trust and cooperation, risk-taking and technology adoption. The issues significance also comes from the opportunities to use the changes in affected people’s behavior in policy to promote growth, development, cooperation and climate change adaptation in the affected countries. The main focus of the paper is the changes in the levels prosocial preferences, risk preferences, and time preferences caused by natural disasters explored by Cameron and Shah (2012) in Indonesia, Cassar et al (2011) in Thailand, Castillo and Carter (2011) in Honduran, Belfor (2015) in Solomon Islands and some others. On the current stage of the issues exploration most of the researches use economical experiments, such as trust, risk, ultimatum, and dictator games as well as intensive survey and secondary information analysis. The main findings of the researches boil up to the following conclusions: Natural disasters make the affected people: more risk averse, more prosocial after a moderate, but less prosocial after a severe shock, more patient, and less optimistic about the future. The structure of the work may be explained as following: First, the author gives the definition of a natural disaster as a particular case of an extreme shock, its statistics for the world and the developing countries in particular; Second, the author introduces the results and findings from the studies mentioned above, including the discussion of the change process; Finally, the author gives the conclusion and summary.