This working paper investigates the economic response of rural households to natural disasters in Pakistan. It explores the extent to which households adjust their savings, and income strategies, in response to floods. Using a detailed panel dataset that was assembled concurrently with two major flood events, the working paper finds evidence of an economic response, although adjustments appear to be temporary as affected farmers move away from agriculture as an immediate response to floods, but they return within a year.
The analysis also finds that although flood exposure lowers savings, adjustments in income strategies help farmers to overcome immediate losses and initiate recovery. Flood affected households also allocate a significantly higher portion of their post-flood income than unaffected households to replenishing livestock and seeds. These results have policy implications in terms of strategies to develop non-farm employment opportunities and finance economic migration to reduce income vulnerability.
Image: Floods in Pakistan, a father evacuates his children, Creative Commons License
by: REUTERS/Adrees Latif