Natural disasters and poverty: evidence from a flash flood in Brazil

In 2008, a flash flood of unprecedented occurrence happened in the state of Santa Catarina, in the southern region of Brazil. Over 600 thousand individuals were directly impacted by this event, and 97 deaths were registered on the most impacted region. This paper estimates the impact of this natural disaster on the poverty level. For this purpose, we use a difference-in-differences methodology that exploits the exogenous variation in geographic location and timing. The dataset used came from the Brazilian National Household Sample Survey (PNAD), and the timeline started at 2001 and ended in 2015. Our results indicate that the flood increased the likelihood of an individual falling below the extreme poverty line by 2 p.p. in 2009. This effect increases over the years, reaching approximately 6 p.p. in 2014. The effects are considered greater for non-whites and residents in rural areas. Moreover, the effects are considered greater the lower the level of education and the higher the home density. The robustness of estimates is checked to the existence of dynamic changes that might coincide with the occurrence of the flood. Also, the study identified that the mechanisms behind our results are related to the informal employment rate per family and the non-work-related income.