Direct Shock Experience vs. Tangential Shock Exposure: Indirect Effects of Flood Shocks on Well-Being and Preferences

Abstract

With extreme weather events on the rise, the question of how witnessing adverse weather events may affect individuals' perception, and consequently their subjective well-being, gains in relevance. To identify events that have been witnessed, i.e., tangential exposure to a weather shock, satellite-based data on flooding is linked to an extensive household panel survey from rural Southeast Asia. Contrasting direct shock experience with tangential shock exposure, we find that mere proximity to a potentially adverse shock, without reporting any actual direct shock experience, could be sufficient to reduce subjective well-being. This effect is not only restricted to the present but can also impinge on expected future well-being dynamics. Eventually, such a persistent effect from witnessing a weather shock may have further politico-economic repercussions, for instance, by altering support for redistribution policies.