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Consumption response to a natural disaster: Evidence of price and income shocks from Chennai flood

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  • Agarwal, Sumit
  • Ghosh, Pulak
  • Zheng, Huanhuan

Abstract

We utilize monthly individual-level financial data and item-level supermarket sales data to study how consumption responds to one of the costliest natural disasters in India. We find that consumption dropped by 11% during the disaster, 65% of which was recovered after the disaster. On average, consumption per capita dropped by $312 per year, which costs about 5% of the GDP. We also show that natural disasters depressed consumption through income shocks instead of price shocks. Consumers smooth consumption using credit card, banks loans and wealth in coping with the shocks.

Suggested Citation

  • Agarwal, Sumit & Ghosh, Pulak & Zheng, Huanhuan, 2024. "Consumption response to a natural disaster: Evidence of price and income shocks from Chennai flood," Energy Economics, Elsevier, vol. 131(C).
    • Handle: RePEc:eee:eneeco:v:131:y:2024:i:c:s0140988324000318
    DOI: 10.1016/j.eneco.2024.107323
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    More about this item

    Keywords

    Natural disaster; Income shocks; Price shocks; Online shopping; Household finance;
    All these keywords.

    JEL classification:

    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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