The effect of natural disaster on individual-level aspiration: evidence from rural Nepal

Abstract

In this study, I analyze the effect of the 2015 Nepal earthquake on individual-level aspiration. I use the data from a longitudinal household survey in rural Nepal from 2014 and 2016, and the earthquake intensity data from the United States Geological Survey (USGS). Using a fixed effects model, I find that compared to those who experienced below median earthquake intensity in terms of Modified Mercalli Scale (MMI), those who experienced MMI between the 50th and 75th percentile had their aspiration index drop by 0.14 of a standard deviation. Similarly, the drop was 0.33 of a standard deviation for those experiencing MMI more than 75th percentile. This finding adds to the literature that natural disaster not only damages physical infrastructure but also curtails individual's overall aspiration, which, as the economic literature illustrates, has a negative effect on investment. There was, however, no consistent statistically significant effects on the individual components of aspiration.