Natural Disasters, Social Protection, and Risk Perceptions

Area of Science:

• Environmental Economics
• Behavioral Economics
• Disaster Risk Management

Background:

• Natural disasters cause damage and influence future risk perceptions.
• Economic literature explores how disaster exposure affects risk attitudes and behavior.
• Understanding these effects is crucial for policy, especially with climate change.

Purpose of the Study:

• To investigate the impact of Cyclone Evan on Fijian households' risk attitudes and expectations.
• To analyze how disaster exposure causally affects risk perceptions and beliefs about future shocks.
• To examine ethnic differences in responses to natural disasters.

Main Methods:

• Utilized the random path of Cyclone Evan to establish causal links.
• Assessed changes in risk attitudes and subjective expectations of disaster likelihood and severity.
• Compared household risk perceptions with climate and hydrological model predictions.

Main Results:

• Extreme weather events substantially altered risk perceptions and future shock beliefs.
• Indo-Fijians showed changes in risk attitudes and perceptions, aligning with prior research.
• Indigenous Fijians exhibited minimal changes in risk attitudes and perceptions.
• Both ethnic groups overestimated future disaster risks compared to scientific models.

Conclusions:

• Disaster exposure significantly impacts risk beliefs, but effects vary ethnically.
• Overestimation of disaster risk may lead to inefficient investment decisions.
• Addressing belief biases is vital for policy design to mitigate economic inefficiencies, particularly in a changing climate.