Insuring Growth : The Impact of Disaster Funds on Economic Reconstruction in Mexico
Climate change has considerably increased the likelihood of experiencing extreme weather events. Governments in developing countries have a limited capacity to smooth the losses created by extreme weather, and could potentially benefit from the int...
| Main Authors: | , , |
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| Format: | Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2016
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2016/06/26509996/insuring-growth-impact-disaster-funds-economic-reconstruction-mexico http://hdl.handle.net/10986/24631 |
| Summary: | Climate change has considerably
increased the likelihood of experiencing extreme weather
events. Governments in developing countries have a limited
capacity to smooth the losses created by extreme weather,
and could potentially benefit from the introduction of
disaster funds, that is, ex-ante budgeting allocations for
post-disaster reconstruction. So far the implementation of
disaster funds has been limited, in part because it is still
unclear whether disaster funds provide a cost-effective way
of coping with these losses. By taking advantage of the
sharp rules that govern the municipal-level eligibility for
reconstruction funds in Mexico, this paper provides some of
the first estimates of the impact of disaster funds on local
economic activity. The main finding is that access to
disaster funding boosts local economic activity between 2
and 4 percent in the year following the disaster. Another
finding is that the positive impact of disaster funds on
local economic recovery can persist for as long as a year
and a half after the disaster. Consistent with these
findings, we additionally show that access to disaster
funding leads to a large and sustained 76 percent increase
in the growth of local construction employment. This labor
market impact slightly precedes the overall increase in
local economic activity. |
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