Emilia Tjernström, an assistant professor at the La Follette School, and colleagues used a 2012 cyclone in Fiji as a natural experiment to identify the impact of direct exposure to natural hazards on Fijian households’ risk attitudes and subjective expectations about future natural disasters.
The researchers found that being struck by an extreme event substantially changed individuals’ risk perceptions and their beliefs about the frequency and magnitude of future shocks. They also found sharply distinct results for the two ethnicities in their sample – indigenous Fijians (iTaukei) and Indo-Fijians.
Being struck by Cyclone Evan increases future expectations of loss and damage over the next 20 years among Indo-Fijian respondents. In contrast, being struck by Cyclone Evan affected neither iTaukei respondents’ expectations about future disaster risk nor their risk attitudes
The researchers posit that the iTaukei collectivist social structure may make indigenous Fijians better placed to absorb shocks than Indo-Fijians. Another possibility is that iTaukei have long oral histories regarding natural disasters, which would make a single event less impactful.
To provide welfare implications for their results, the researchers compared households’ risk perceptions to climate and hydrological models of future disaster risk, and found that both ethnic groups over-infer the risk of future disasters relative to the model predictions.
“If such distorted beliefs encourage over-investment in preventative measures at the cost of other productive investments, these biases could have negative welfare impacts,” Tjernström and colleagues wrote in the April 2018 issue of World Development.