Do networks matter after a natural disaster? A study of resource sharing within an informal network after Cyclone Aila

Natural disasters frequently occur across both developed and developing countries. The vast majority of lives that are lost and affected by natural disasters are from poor areas in developing countries. We examine the post-disaster recovery of the households in rural Bangladesh that were affected by Cyclone Aila from 2009 to 2010. Exploiting exogenous variations in households' exposure to the disaster within the village, we provide empirical evidence of resource sharing within the households' informal network of neighbors and relatives to assist in recovery from the natural disaster. We find a household's own exposure to the disaster had no significant effect on its investment and income; however, exposure to a household's network had a significant effect on household investment and income two years and six months after the cyclone. We find that informal resource sharing within a household's network crowded out the household's need to purchase formal insurance against disasters.