How Do People Cope With Natural Disasters? Evidence from the Great Hanshin-Awaji Earthquake

We investigate how people coped with unexpected losses caused by the 1995 Hanshin-Awaji earthquake by using an unusually rich household data. Several empirical findings emerged. We found that the coping means were specific to the nature of the loss caused by the earthquake. For example, borrowing was extensively used to recover the damages to housing, whereas dissavings were utilized to compensate for the loss to assets. Our analysis in this paper contains important policy implications in the preparation of well-designed social safety nets against future natural disasters. Since the economic losses caused by natural disasters are often too large for the government to support effectively, its role is to facilitate the self-insurance of the victims of the disasters. Our empirical results suggest that provisions of the subsidized loan programs to the victims can be a good example.