The Economics of Disaster Relief

We distinguish among three types of actions that can be taken to alleviate the consequences of natural disasters: precautionary efforts (made ex ante), relief efforts (made in the immediate aftermath of a disaster), and recovery efforts (made ex post). We argue that recognizing this distinction lessens many of the problems that the literature attributes to government intervention and hence expands the scope of government action following disasters. Relief is less likely than recovery to generate over-supply by the government and over-reliance by victims.