Disasters, disaster preparedness and post disaster recovery: Evidence from Caribbean firms

Abstract

Firms are exposed to various kinds of risks such as man-made and natural disasters that can negatively affect their business. The objective of this paper is to contribute to a better understanding of disasters, disaster preparedness, and post disaster recovery strategies and the private sector in Caribbean Small Island Developing States (SIDS), a region highly vulnerable to such impacts. A Stochastic Frontier Analysis (SFA) was adopted using a novel database-the Innovation, Firm Performance, and Gender (IFPG) firm-level dataset conducted in the Caribbean in 2020 to estimate the production function as well as technical efficiency scores of firms, following which the efficiency scores were regressed against disaster preparedness and post disaster recovery strategies, and other firm-specific control variables using robust standard errors clustered at the country and sector level. The results indicate that disaster preparedness and post disaster recovery strategy affect technical efficiency. In particular firms with a post disaster recovery plan to resume operations after a disaster, firms with knowledge of which parts of their business need to be operational following a disaster, and firms that ensure that their suppliers have a post disaster recovery plan experience a positive effect on technical efficiency, while firms operating in a building that is able to withstand disasters negatively affects technical efficiency.