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Rules for Recovery: Impact of Indexed Disaster Funds on Shock Coping in Mexico†

Rules for Recovery: Impact of Indexed Disaster Funds on Shock Coping in Mexico† AbstractGovernment provision of disaster transfers is typically hampered by liquidity constraints and by weak rules and administrative capacity to disburse reconstruction resources. We show that by easing these hurdles, Mexico’s indexed disaster fund (Fonden) considerably accelerates economic recovery after a disaster. To estimate Fonden impact on recovery, as measured by night lights, we exploit the heavy rainfall index that determines program eligibility. We find that for one year after a disaster, eligible municipalities are 6 percent brighter than those ineligible, with gains likely concentrated among less resilient municipalities. We additionally document how Fonden rules shield resources from political abuse. (JEL G22, H12, H84, O13, O18, Q54, R38) http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png American Economic Journal Applied Economics American Economic Association

Rules for Recovery: Impact of Indexed Disaster Funds on Shock Coping in Mexico†

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Publisher
American Economic Association
Copyright
Copyright © 2020 © American Economic Association
ISSN
1945-7790
DOI
10.1257/app.20190002
Publisher site
See Article on Publisher Site

Abstract

AbstractGovernment provision of disaster transfers is typically hampered by liquidity constraints and by weak rules and administrative capacity to disburse reconstruction resources. We show that by easing these hurdles, Mexico’s indexed disaster fund (Fonden) considerably accelerates economic recovery after a disaster. To estimate Fonden impact on recovery, as measured by night lights, we exploit the heavy rainfall index that determines program eligibility. We find that for one year after a disaster, eligible municipalities are 6 percent brighter than those ineligible, with gains likely concentrated among less resilient municipalities. We additionally document how Fonden rules shield resources from political abuse. (JEL G22, H12, H84, O13, O18, Q54, R38)

Journal

American Economic Journal Applied Economics – American Economic Association

Published: Oct 1, 2020

References