THE DETERMINANTS OF INVESTMENT ON FLOODS MITIGATION ACTIVITIES: AN EMPIRICAL INVESTIGATION IN SRI LANKA

Abstract

Sri Lanka has experienced a variety of natural disasters that have had a disastrous impact on human wellbeing as well as economic welfare of the country. Available data shows that after 1970s, number of both intensive and extensive disasters have been increasing in the country by causing considerable impacts on human life, shelter, livelihood and the economy. The most frequently reported disaster events in Sri Lanka are bushfires, floods, extreme wind events, landslides, lightning and droughts. In general, people take rational decisions of investing in mitigation activities if they understand not only the value of physical impacts of natural disasters, but also their likely social and economic consequences. Given this background this study investigates peoples’ investment on mitigating activities for floods in Rathnapura and Matara districts in Sri Lanka. Floods and landslides are very common in these districts and prolonged duration of floods in many affected areas in the districts results in a high degree of damage to life and household assets in every year. This study uses survey data covering 350 households in those two districts who were victims of the 2017 floods. We estimated the economic cost of the damages which is on average 27 % of their annual income. It is found that economic loss of the poor is relatively higher than high income group suggesting that the poor are more severely impacted than the non-poor households in the study area. Regression results show that household income, education, size of the farm, family size and risk taking behavior serve as the key determinants of the investment on mitigating activities of floods in the study areas.