Rules for Recovery: Impact of Indexed Disaster Funds on Shock Coping in Mexico
Alejandro del Valle
Alain de Janvry
- American Economic Journal: Applied Economics (Forthcoming)
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.
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