Saving lives with indexed disaster funds: Evidence from Mexico
- American Economic Journal: Economic Policy
- 16(2), May, 2024: p.442-479
This paper examines the role of Mexico’s indexed disaster fund (Fonden) in mitigating the mortality impacts of natural disasters. Exploiting a discontinuity in eligibility rules, the study shows that accelerated reconstruction of public infrastructure significantly reduces disaster-related deaths. The impact is concentrated in areas with medical infrastructure and among conditions responsive to basic, freely available medical care, suggesting that Fonden operates by restoring access to health services. The analysis further demonstrates that Fonden is cost-effective compared to alternative interventions, with a benefit–cost ratio of at least 3.2. These findings highlight the importance of indexed disaster funds as a policy tool for saving lives and strengthening resilience in disaster-prone regions. Developing economies are not disproportionately exposed to natural disasters, but they experience significantly more deaths. Exploiting a discontinuity in the eligibility rules for Mexico's indexed disaster fund (Fonden), I show that the accelerated reconstruction of public infrastructure can significantly mitigate the mortality impacts of disasters. Fonden's impact is concentrated in areas with medical infrastructure and among conditions responsive to basic and freely available medical care. These findings suggest that Fonden operates by restoring access to health services. I also show that Fonden is cost-effective relative to other interventions and that its benefit–cost ratio is at least 3.2.- Reproduced