Abstract
We investigate the economic response of households to natural disasters in Bangladesh and Pakistan. In particular, we explore to what extent households adjust their income and employment strategies and savings in response to exposure to floods and storms. Using two unique panel datasets, we find evidence of autonomous adjustments in both countries. In Bangladesh, farmers move away from farm to nonfarm employment as a coping strategy to tackle immediate reductions in their total household income from exposure to disasters, whereas nonfarmers increase their off-farm labor supply. Such adjustments in employment strategies are stronger among the storm-affected households than the flood-affected households. On the other hand, although farmers in Pakistan move away from agriculture as an immediate response to disasters, they eventually come back to agriculture within a year of disaster exposure. We also identify that such adjustments in employment and income strategies help farmers to overcome the immediate losses from disaster exposure as the disaster-affected households from both Bangladesh and Pakistan exhibit at least no decrease in their savings behavior. We discuss policy implications in terms of developing nonfarm employment opportunities to reduce the future harms of disaster and financing economic migration to reduce income vulnerability.
Highlights
Natural disasters such as floods and storms harm the rural poor, who mostly depend on agriculture for employment and income
For Bangladesh, we evaluate whether variations in disaster exposure and primary occupation predict the magnitude of the changes in employment and savings behaviors by Bangladeshi households
Sources: All household data come from the Bangladesh Climate Change Adaptation Survey (BCCAS) I and II for Bangladesh and the Pakistan Rural Household Panel Survey (PRHPS) I and II for Pakistan
Summary
Natural disasters such as floods and storms harm the rural poor, who mostly depend on agriculture for employment and income. The existing literature addresses the welfare effects of increases in agricultural and nonagricultural labor supply (e.g., Mueller and Quisumbing 2011), the possibility of change in dependence on agriculture in the aftermath of a disaster is not yet addressed Against this backdrop, this paper contributes by investigating the extent of household-level adjustment in income and employment strategies and savings behavior in response to exposure to floods and storms for the case of Bangladesh and Pakistan. Evidence from Bangladesh and Pakistan | 3 in Pakistan immediately move away from agriculture, they eventually come back within a year of disaster exposure Such changes in employment and income strategies may not necessarily imply a structural change; they do imply a household’s success in coping with the harms of disaster since the disaster-affected households from both Bangladesh and Pakistan were able to maintain at least a nondecrease in their levels of savings.
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