Hiding Behind the Veil of Ashes: Social Capital in the Wake of Natural Disasters

This paper investigates the impact of natural disasters on social capital. By heterogeneously affecting people in a community, natural disasters create a temporary information asymmetry on their post-disaster income. Using an original dataset collected in rural Ecuador, we provide suggestive evidence that households use this asymmetric information to pretend to be poorer than they actually are, in order to escape from solidarity mechanisms in the aftermath of the shock. The magnitude of this effect decreases with the level of wealth inequality in the community and vanishes in the most unequal communities where bilateral cooperation is rather fostered.