Cash grants to informal firms after Cyclone Idai: beyond the null

Abstract

This study investigates the effects of unconditional cash grants on informal manufacturing firms’ recovery after Cyclone Idai struck Mozambique in 2019. Using a novel stratified adaptive cluster sampling approach, we collected representative panel data from firms in Beira (heavily affected) and Chimoio (less affected). Many firms demonstrated rapid initial recovery without financial intervention, but did not sustain this over time. Although the overall effect of the grants on the full sample is not statistically significant, important heterogeneity in treatment effects did emerge. In Beira, the grants positively influenced firm recovery, whereas no significant effects were observed in Chimoio. Within Beira, the grants were particularly beneficial for firms that suffered greater damage, employed more workers, operated in the carpentry subsector, and invested the funds in machinery or tools. We explore potential explanations of the overall null result, including rapid self-recovery and the unique challenges faced by manufacturing firms, while highlighting the importance of targeting specific subgroups in future disaster recovery efforts.