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Natural disasters have crucial implications for economic development. Not only do they generally cause damage to an economy’s physical and human capital as well as its institutions, disasters can also lead to changes in people’s behaviour. 1 Largely unexpected and severe disasters could induce a revision of subjective expectation of risk exposure by affected households. Experiencing or observing disasters may also alter the risk, time, and social preferences of households and these may in turn result in changes in their behavioural choices.

Several recent studies have shown empirical evidence that disasters can cause changes in risk, time, and social preferences. Regarding risk preference, Eckel, et al.(2009) found that experiencing hurricane Katrina affected risk preferences of the hurricane evacuees. Cameron and Shah (2012) found that individuals who had recently suffered a flood or earthquake in Indonesia exhibited greater risk aversion than individuals living in similar but unaffected villages. Cassar, et al.(2011) showed that the 2004 Indian Ocean tsunami in Thailand resulted in higher risk aversion. Page, et al.(2012) studied the 2011 Brisbane flood in Australia and found that after a large negative wealth shock, those directly affected became more willing to adopt riskier options in their decision-making process. Regarding time preference, Callen (2011) showed that exposure to the Indian Ocean Earthquake tsunami affected a patience measure in a sample of Sri Lankan wage workers. Regarding social preference, Castillo and Carter (2011) found that the large negative shock caused by Hurricane Mitch in 1998 affected altruism, trust …