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Are People Insured Against Natural Disasters? Evidence from the Great Hanshin-Awaji (Kobe) Earthquake in 1995

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  • Yasuyuki Sawada

    (Faculty of Economics, University of Tokyo)

  • Satoshi Shimizutani

    (Institute of Economic Research, Hitotsubashi University)

Abstract

We investigate whether people were insured against unexpected losses caused by the Great Hanshin-Awaji (Kobe) earthquake in 1995. The unique household data employed led to several empirical findings under a natural-experimental situation. The complete consumption insurance hypothesis is rejected overwhelmingly, suggesting the ineffectiveness of the formal and/or informal insurance mechanisms against the earthquake. We also investigate possible factors that inhibit full risk-sharing. Transfers may be particularly ineffective as insurance against losses for co-resident households. Households borrow extensively against housing damages, whereas dissavings are utilized for smaller asset damages, implying a hierarchy of risk-coping measures, from dissaving to borrowing.

Suggested Citation

  • Yasuyuki Sawada & Satoshi Shimizutani, 2005. "Are People Insured Against Natural Disasters? Evidence from the Great Hanshin-Awaji (Kobe) Earthquake in 1995," CIRJE F-Series CIRJE-F-314, CIRJE, Faculty of Economics, University of Tokyo.
    • Handle: RePEc:tky:fseres:2005cf314
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    1. SAWADA Yasuyuki & MASAKI Tatsujiro & NAKATA Hiroyuki & SEKIGUCHI Kunio, 2017. "Natural Disasters: Financial preparedness of corporate Japan," Discussion papers 17014, Research Institute of Economy, Trade and Industry (RIETI).
    2. Yasuyuki Sawada, 2007. "The impact of natural and manmade disasters on household welfare," Agricultural Economics, International Association of Agricultural Economists, vol. 37(s1), pages 59-73, December.
    3. Yasuyuki Sawada & Satoshi Shimizutani, 2007. "Consumption Insurance and Risk-Coping Strategies under Non-Separable Utility: Evidence from the Kobe Earthquake," CARF F-Series CARF-F-106, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
    4. Yasuyuki Sawada & Satoshi Shimizutani, 2011. "Changes in durable stocks, portfolio allocation, and consumption expenditure in the aftermath of the Kobe earthquake," Review of Economics of the Household, Springer, vol. 9(4), pages 429-443, December.
    5. Yasuyuki Sawada, 2017. "Disasters, Household Decisions, and Insurance Mechanisms: A Review of Evidence and a Case Study from a Developing Country in Asia," Asian Economic Policy Review, Japan Center for Economic Research, vol. 12(1), pages 18-40, January.
    6. Yasuyuki Sawada & Satoshi Shimizutani, 2008. "How Do People Cope with Natural Disasters? Evidence from the Great Hanshin-Awaji (Kobe) Earthquake in 1995," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 40(2-3), pages 463-488, March.
    7. Yasuyuki SAWADA & Fauziah ZEN, 2014. "Disaster Management in ASEAN," Working Papers DP-2014-03, Economic Research Institute for ASEAN and East Asia (ERIA).

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