4 of people exposed to drought. The regular occurrence of natural disasters together with the availability of three highly comparable nationally representative household living standard surveys (2002‐2004‐2006) render Vietnam particularly suitable to illustrate the approach advanced in this paper. The study constructs in particular disaggregated maps of the annual occurrence of droughts, (local and riverine) floods and storms during 2001‐2006 as well as the likelihood of their occurrence using meteorological data from rainfall stations, storm tracks, and satellite images. The occurrence of these geo‐referenced disasters, further augmented with the likelihood of their occurrence derived from the historical weather records, is subsequently linked with household consumption and other household and location characteristics from the repeated nationally representative household surveys and secondary data sources to estimate the effect of extreme weather events on household welfare.

The results suggest that the immediate losses from floods and hurricanes can be substantial, with hurricanes causing most havoc (up to 52 percent consumption loss among households close to large urban centers). Households tend to cope well with droughts, largely through irrigation. Frequent exposure to disasters erodes the standard of living, but reduces the immediate effects of shocks as households become less exposed and better prepared. Households in frequently inundated areas have even been able to turn the floods into an advantage, as long as the flooding is not too severe. There is however no adaptation to hurricanes, rather the contrary, with high frequency of hurricanes exacerbating the losses from particular events. Finally, those further away from the large urban centers are not only poorer, but also tend to suffer less from disasters, likely due to the adoption of less risky (but less remunerative) portfolios and a higher likelihood of receiving disaster relief.

The next section outlines the approach used to obtain geographically disaggregated estimates of droughts, heavy rainfall, river floods and storms with hurricane force. Section three reviews the empirical methodology to estimate the welfare effects. Section four reviews the data used and section five presents the empirical findings regarding the welfare effects of different natural disasters. Section six concludes.

# **2 Mapping Natural Hazards**

Vietnam’s 2007 “National Strategy for Natural Disaster Prevention, Response and Mitigation to 2020” identifies droughts, floods, and cyclones as its most important natural hazards. Landslides, which often happen following flash floods or cyclones, are mentioned as well. One common approach to determine whether a household has been affected by an extreme weather event is to ask the household directly. In contrast to external measures of extreme weather events derived from spatially scattered weather stations or satellite data, self‐reported shock measures have the advantage of being locally more accurate—households know whether they experienced an extreme weather event or not. They also circumvent the challenge of identifying the cut‐off beyond which a particular meteorological variable or combination of meteorological variables constitutes an extreme weather event. Indeed, deciding when rainfall is too much or too little, when winds are too strong, flood levels too high, or temperatures too high or too low across a series of settings and groups is demanding.