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Public in-Kind Relief and Private Self-Insurance

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Abstract

This paper provides a new angle on the question of crowding effects of public policies. We examine how non-hypothetical self-insurance behavior by households responds to variations in public investments in relief capabilities based on a large disaster preparedness survey (n = 19,071) conducted in Japan in 2012. In our specific setting which looks at emergency drinking water, (i) government provides in-kind, rather than cash, relief and (ii) the crowding effect observed is more apt to be total, rather than partial. In contrast to much of the literature studying crowding effects of cash relief, we find little evidence for crowding out in emergency drinking water, with an upper bound of 2% at the intensive margin. We also identify important benefits of targeting in-kind relief to households with minors.

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Notes

  1. In developed countries, the contribution of EDW to morbidity and mortality reduction mainly relates to water safety rather than water availability. In a post-disaster environment, disruption of access to uncontaminated drinking water ranks as a primary concern since populations quickly become vulnerable to water-borne diseases.

  2. When capital markets are incomplete and households are liquidity constrained, cash relief could arguable induce crowding effects simply by allowing households to monetize illiquid assets.

  3. Conceptually, self-insurance is the most appropriate definition for behavior in which households store EDW in their own home.

  4. Self-protection could – theoretically – take the shape of activities such as sinking private wells or purchasing water filtration equipment. Such measures are typically either not available (wells) or not cost-effective (water filtration).

  5. Raschky and Weck-Hannemann (2008) and Neumayer et al. (2014) show that crowding effects can also operate at the international level (see also Cohen and Werker 2008).

  6. This is, in fact, not unusual: Also in countries such as the US, officials are typically vaguely aware of the true level of disaster preparedness in the population, and regional or local variations within these levels (Donahue 2010). Donahue et al. (2013) also find that there are fundamental differences between officials’ perceptions of citizens’ preparedness and citizens’ perception of own preparedness.

  7. One English-language example is provided here: http://www.city.hyuga.miyazaki.jp/display.php?cont=160418152455 (accessed on March 10, 2017)

  8. The survey asked households also about other dimensions of preparedness, e.g. emergency food, which is recommended by the authorities. In contrast to water, idiosyncratic tastes matter for food choice and render the identification less clean.

    Public assistant often come with financial assistance as relaxation of loan terms where private assistant is more on in-kind relief and donation as cash. This is similar to recent disaster of 2016 Kumamoto Earthquake.

  9. For a HH member of 13 years of age or older, the amount is 6 l. For the age group between 8 and 12 years, the supply is set at 4.5 l and at 3 l for ages below 8 years. Given the age composition of a HH, there is a specific recommended level of EDWS (in liters) composed of the sum of individual EDW needs. So a family with two adults, child aged 10 and another aged 6 would have to maintain a total supply of 19.5 l EDW in storage continuously in order to comply with the recommendations.

  10. This is in line with previous papers that have noted the relatively rapid decline in the impact of disaster experience on preparedness (Botzen et al. 2009; Kunreuther et al. 1985). Note that we do not control for the age of the head of the household, which could be expected to mitigate the decline in preparedness (Osberghaus 2015).

  11. There may be a small role for insurance through neighbors and other social networks. However, disaster entail highly correlated risk events that render risk sharing ineffective.

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Acknowledgements

Valuable comments on previous drafts of this paper have been provided by Christian Almer, Richard Butler, Luisa Dressler, Malte Lech, Paul Raschky, and Paul Schaudt as well as conference and seminar audiences at the 2016 EAERE conference, the Workshop on the Geospatial Analysis of Disasters and the CEAR/MRIC Behavorial Insurance Workshop 2016. We are grateful to Hiroki Onuma and Shinya Horie for research assistance. T. Goeschl’s research has been supported by a travel grant from the HeKKSaGOn network. S. Managi’s research has been supported by a Grant-in-Aid for Specially Promoted Research (26000001) by the Japanese Society for the Promotion of Science.

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Authors and Affiliations

  1. Department of Economics & Heidelberg Center for the Environment, Heidelberg University, Bergheimer Str. 20, 69115, Heidelberg, Germany

    Timo Goeschl

  2. Urban Institute & School of Engineering, Kyushu University, 744 Motooka, Nishi-ku, Fukuoka, 819-0395, Japan

    Shunsuke Managi

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  1. Timo Goeschl
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  2. Shunsuke Managi
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Correspondence to Timo Goeschl.

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Goeschl, T., Managi, S. Public in-Kind Relief and Private Self-Insurance. EconDisCliCha 3, 3–21 (2019). https://doi.org/10.1007/s41885-018-0031-8

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