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Living with the Merapi Volcano: Risks and Disaster Microinsurance

Author

Listed:
  • Aloysius G. Brata
  • Piet Rietveld
  • Henri L.F. de Groot
  • Budy P. Resosudarmo
  • Wouter Zant

Abstract

This paper investigates the influence of perception of natural disaster risks on the probability of local people to participate in a hypothetical disaster microinsurance. We use household data for a specific disaster risk of the Mount Merapi in Java. We find that respondent's perception of natural disaster risk is in line with experts' risk assessment. Estimation results show that this perception positively influences the interest to participate in disaster microinsurance. We also find that insurance literacy has a strong positive relationship with the respondent's interest to participate in disaster microinsurance.

Suggested Citation

  • Aloysius G. Brata & Piet Rietveld & Henri L.F. de Groot & Budy P. Resosudarmo & Wouter Zant, 2014. "Living with the Merapi Volcano: Risks and Disaster Microinsurance," Departmental Working Papers 2014-13, The Australian National University, Arndt-Corden Department of Economics.
    • Handle: RePEc:pas:papers:2014-13
    as

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    File URL: https://crawford.anu.edu.au/acde/publications/publish/papers/wp2014/wp_econ_2014_13.pdf
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    References listed on IDEAS

    as
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    3. World Bank, 2012. "Advancing Disaster Risk Financing and Insurance in ASEAN Member States : Framework and Options for Implementation, Volume 2. Technical Appendices," World Bank Publications - Reports 12628, The World Bank Group.
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    5. Marcel A.P.M. van Asseldonk & Miranda P.M. Meuwissen & Ruud B.M. Huirne, 2002. "Belief in Disaster Relief and the Demand for a Public-Private Insurance Program," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 24(1), pages 196-207.
    6. Carter, Michael R. & Little, Peter D. & Mogues, Tewodaj & Negatu, Workneh, 2007. "Poverty Traps and Natural Disasters in Ethiopia and Honduras," World Development, Elsevier, vol. 35(5), pages 835-856, May.
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    11. Akter, Sonia & Brouwer, Roy & Chowdhury, Saria & Aziz, Salina, 2008. "Determinants of Participation in a Catastrophe Insurance Programme: Empirical Evidence from a Developing Country," 2008 Conference (52nd), February 5-8, 2008, Canberra, Australia 5984, Australian Agricultural and Resource Economics Society.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    perception of risks; eruptions; microinsurance; Merapi;
    All these keywords.

    JEL classification:

    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis

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