Are private defensive expenditures against storm damages affected by public programs and natural barriers? Evidence from the coastal areas of Bangladesh. (1st August 2016)

• Record Type: Journal Article
• Authors: Mahmud, Sakib; Barbier, Edward B.
• Is Part Of: Environment and development economics. Volume 21:Number 6(2016:Dec.)
• Page Start: 767
• Page End: 788
• Publication Date: 2016-08-01
• Subjects: Economic development -- Environmental aspects; 330.9
• DOI: 10.1017/S1355770X16000164
• Languages: English
• ISSNs: 1355-770X

Abstract

Abstract: This paper introduces a household model of private investment in storm protection under an endogenous risk framework to determine how defensive self-protection and self-insurance expenditures by coastal households to mitigate storm-inflicted damages are affected by the availability of public programs and the presence of a mangrove forest. The theoretical results show that publicly constructed physical barriers and mangroves encourage self-protection but discourage self-insurance expenditures. However, public disaster relief and rehabilitation programs lead to the crowding-out of self-protection but the crowding-in of self-insurance. Our empirical analysis of coastal households in Bangladesh impacted by Cyclone Sidr reveals partial support for the crowding-out and crowding-in effects of public investments and programs. Households located in a mangrove-protected area invest more in self-protection and less in self-insurance. Other controls, such as household socio-economic characteristics, also influence and add a degree of complexity to the relationship.