Government 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.
del Valle, Alejandro, Alain de Janvry, and Elisabeth Sadoulet.
"Rules for Recovery: Impact of Indexed Disaster Funds on Shock Coping in Mexico."
American Economic Journal: Applied Economics,
Insurance; Insurance Companies; Actuarial Studies
Economic Development: Agriculture; Natural Resources; Energy; Environment; Other Primary Products
Economic Development: Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
Climate; Natural Disasters and Their Management; Global Warming
Production Analysis and Firm Location: Government Policy