TY - JOUR
T1 - Poverty and inequality impact of a natural disaster
T2 - Myanmar's 2008 cyclone Nargis
AU - Warr, Peter
AU - Aung, Lwin Lwin
N1 - Publisher Copyright:
© 2019 Elsevier Ltd
PY - 2019/10
Y1 - 2019/10
N2 - According to national household survey data for Myanmar, spanning the five-year interval 2005–2010, average real household consumption expenditures remained stagnant, but measured poverty incidence and inequality both declined significantly. The distribution of the economic pie shifted in favor of the poor while the overall size of the pie barely changed. This paper examines the possibility that the hitherto unexplained reduction in measured inequality was caused, at least partly, by a natural disaster, Tropical Cyclone Nargis, which devastated parts of Myanmar in May 2008. This hypothesis is supported by a recent historical study which argues that, globally, large reductions in inequality normally occur only through either man-made or natural disasters. The paper develops a method, based on regression analysis of household level data, for isolating the impact of an exogenous natural event like a cyclone. The estimated regression model is used to simulate a counterfactual distribution of expenditures in which, hypothetically, the cyclone did not occur. The estimated impact of the cyclone is the difference between the observed outcome, in which the cyclone happened, and this simulated, counterfactual outcome in which it did not. The findings indicate that the cyclone reduced inequality between regions of Myanmar, because the negatively affected regions were on average better-off than the unaffected regions, both before and after the cyclone. Within the affected regions the negative impact of the cyclone was largest in absolute terms among richer households, but as a proportion of household expenditures, these negative effects were larger among the poorer households. The cyclone therefore increased economic inequality within the affected regions. Overall measured inequality declined because the between-region reduction exceeded the within-region increase.
AB - According to national household survey data for Myanmar, spanning the five-year interval 2005–2010, average real household consumption expenditures remained stagnant, but measured poverty incidence and inequality both declined significantly. The distribution of the economic pie shifted in favor of the poor while the overall size of the pie barely changed. This paper examines the possibility that the hitherto unexplained reduction in measured inequality was caused, at least partly, by a natural disaster, Tropical Cyclone Nargis, which devastated parts of Myanmar in May 2008. This hypothesis is supported by a recent historical study which argues that, globally, large reductions in inequality normally occur only through either man-made or natural disasters. The paper develops a method, based on regression analysis of household level data, for isolating the impact of an exogenous natural event like a cyclone. The estimated regression model is used to simulate a counterfactual distribution of expenditures in which, hypothetically, the cyclone did not occur. The estimated impact of the cyclone is the difference between the observed outcome, in which the cyclone happened, and this simulated, counterfactual outcome in which it did not. The findings indicate that the cyclone reduced inequality between regions of Myanmar, because the negatively affected regions were on average better-off than the unaffected regions, both before and after the cyclone. Within the affected regions the negative impact of the cyclone was largest in absolute terms among richer households, but as a proportion of household expenditures, these negative effects were larger among the poorer households. The cyclone therefore increased economic inequality within the affected regions. Overall measured inequality declined because the between-region reduction exceeded the within-region increase.
KW - Cyclone Nargis
KW - Expenditure distribution
KW - Inequality
KW - Myanmar
KW - Regression-based decompositions
UR - http://www.scopus.com/inward/record.url?scp=85067596439&partnerID=8YFLogxK
U2 - 10.1016/j.worlddev.2019.05.016
DO - 10.1016/j.worlddev.2019.05.016
M3 - Article
SN - 0305-750X
VL - 122
SP - 446
EP - 461
JO - World Development
JF - World Development
ER -