Macro/Finance Group, NIPFP

Chennai 2015: A novel approach to measuring the impact of a natural disaster

Chennai 2015: A novel approach to measuring the impact of a natural disaster, Ila Patnaik, Renuka Sane and Ajay Shah, NIPFP Working Paper No. 285, December 2019.

We estimate the impact of one flood on economic outcomes of households located in the region (Chennai, India). We measure the impact of the flood on income and consumption of households, and explore heterogeneity in impact by prosperity and financial constraints. We exploit a novel panel dataset (the CMIE CPHS) which covers 170,000 households in India, three times a year.

We find that immediately after the floods, there was a sharp increase in consumption, which is reversed over a year. Expenditures are financed by not saving,or postponing asset purchases. The expenditure increase for the more vulnerable,or the financially constrained households, is smaller. This may be consistent with greater hardship for them.

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