Do tropical typhoons smash community ties? Theory and Evidence from Vietnam Yanos Zylberberg∗ Paris School of Economics Preliminary and incomplete draft Abstract In rural economies, risk-sharing arrangements through networks of relatives and friends are common. Indeed, contract enforcement issues impede the development of formal insurance mechanisms. However, after a disruption of the allocative instru- ments of the market, the prerequisites under which informal arrangements are feasible might evolve. I rely on a model of imperfect commitment to derive predictions on the sustainability of risk-sharing arrangements in the aftermath of extreme events. I then test these predictions on a representative panel data in Vietnam, using tropical ty- phoons trails and wind structures. The estimation of a structural equation derived by the theory is compatible with a model of imperfect commitment where the aftermath of natural disasters is associated with stronger enforcement mechanisms at commune level. Allowing for altruistic sentiments or coordination among the members of a community, I find that a resurgence of charity or a higher level of cooperation explain this unexpected result. The influence of pre-disaster social norms and existing ties to prevent disruption of integrative mechanisms in the community gives support to this interpretation. Finally, communities having already suffered important trauma show greater signs of resilience. Keywords: Natural disasters, informal insurance, coordination, imperfect commit- ment. JEL classification: D85, O12, O17, Z13 ∗PhD Candidate, Paris School of Economics, 48 Boulevard Jourdan, 75014 Paris. Phone: (33)1 43 13 63 14. Email:
[email protected]. I thank the Joint Typhoon Warning Center, the National Archives and Records Administration, and the Centre for Research on the Epidemiology of Disasters for providing the data.