22 than 500,000 inhabitants) are on average more likely to receive disaster aid (see positive coefficient on log hours to 500k city). While the amounts received tend to be smaller, it does help in coping with the welfare loss. Furthermore, relief efforts appear not to be sustained much beyond the first year. The disaster relief systems appear especially well developed in frequently flooded areas (both localized and riverine or coastal) close to the major urban centers. Official disaster assistance is not given following hurricane force winds. There are no clear systematic patterns with respect to the reception of domestic or foreign remittances. Sectoral income diversification does not emerge as a major coping strategy, with the exception of the larger income diversification observed in drought prone areas closer to the urban centers. Asset losses, which can result from direct damage or through asset disposal to self insure, often show up with a delay and tend to be less severe further away from the urban centers.

In conclusion, while households largely manage to cope with drought events, often through asset disposal, but especially through irrigation, the frequent occurrence of droughts erodes their capacity to cope with them over time, resulting in a substantial welfare loss among households in drought prone areas closer to the urban centers. Households in drought prone areas further away from the urban capitals also suffer, but less as they manage to hang on to their assets better because of drought responsive relief efforts. Localized flooding exerts an immediate 7 percent toll on welfare though much of that loss appears to be recuperated the next year potentially through replacement of the lost asset base by better more productive ones, at least among those that are not frequently hit. The latter tend to suffer less immediately, partly through the reception of disaster aid, but they also benefit less from the faster adoption of more productive assets, likely resulting in some asset erosion over time and lower consumption levels (though to a lesser extent than in the case of regular rainfall failure). The damage from frequent exposure to localized floods is again less severe among those further away from the urban centers, as they experience less asset loss, while receiving more immediate disaster relief. Riverine floods can cause substantial welfare damage (23 percent), especially among those not frequently exposed, who tend to be better served by disaster relief, at least when living close to the urban centers. Finally, the largest damage is inflicted by hurricane force winds, with both regular exposure and proximity to the urban centers exacerbating the welfare losses substantially.

# **6 Concluding Remarks**

Understanding how natural disasters affect human welfare is an increasingly pressing concern, not least in Vietnam, which ranks among the most disaster prone countries in the world. This study illustrates a methodology to study the welfare effects of such events in a country specific setting using spatially disaggregated disaster maps derived from primary meteorological data combined with nationally representative geo‐referenced household survey data. By deriving the spatially disaggregated event and hazard maps directly from the meteorological data, issues of endogeneity in estimating the effect of such events on consumption are mitigated. The event and hazard maps provide also useful tools for policy and project planning. In addition, in estimating the welfare effects, spatial correlation was also accounted for. While the latter is routinely ignored, this is less suitable in empirical examinations of the household welfare effects of spatially disaggregated