education. In contrast, Columns 7 and 8 show that the value of cattle increases with the probability of drought above some threshold probability (0.189 in Column 7 and 0.159 in Column 8).

In Malawi, results support threshold probabilities above which the probability of drought significantly increases maximum years of education (thresholds: 0.238 in Column 9, and 0.123 in Column 10) and the value of cattle (0.248 in Column 12).

The above finding is theoretically interesting. In the above results, threshold probabilities are relatively small. First, the environment of no disaster risk seems to encourage investments in human capital and livestock. Second, as disaster risk increases, precautionary motives to invest in assets with the expectations of future disasters will offset the above risk-aversion effect. In the environment in our sample, the incentive to hold human capital (Bangladesh and Malawi) and livestock (Ethiopia and Malawi) is positive in a reasonable range of the future disaster probability.

Interestingly, the above findings are consistent with our previous findings on the risk mitigating effects of household education. In Bangladesh (Tables 4 and 5) and Malawi (Table 7), we found that maximum education significantly mitigates the negative impact of flood and drought on schooling investment respectively. For Ethiopia (Table 6) we did not find significant effects of maximum education. Therefore, the positive association between pre-disaster household human capital and the future risk of drought is consistent with the actual impacts of droughts on child schooling investments.

# **6. Conclusion**

This paper examined the impacts of natural disasters on schooling investments with special emphasis on the roles of ex-ante actions and ex-post responses using panel data from Bangladesh, Ethiopia and Malawi. The importance of ex-ante actions depends on disaster risks and the likelihood of public assistance.

Empirical results show interesting heterogeneity in both asset portfolio as well as ex-ante and ex-post responses. In Bangladesh and Malawi, a higher future disaster probability increases the likelihood of holding more human capital relative to land. However, in Ethiopia, investments in human capital are not systematically related to the future disaster probabilities. The likelihood of holding livestock is positively associated with a higher probability of drought in Ethiopia and Malawi.

In all cases, we found an interesting non-linearity: the effect of future disaster risk on asset holding becomes positive when the disaster probability goes above some threshold (relatively small). There seem to be two offsetting effects of the disaster risk. The future risk discourages investment since it makes returns uncertain, while it encourages investments for the need of mitigating disaster impacts. In disaster prone areas, the latter effect offsets the former effect.

Our results confirm that both ex-ante private and ex-post public responses, working mostly through emergency assistance programs in the latter case, help to mitigate disaster impacts, but the balance between ex-ante and ex-post actions varies across countries.

In Ethiopia, public assistance plays a more important role than ex-ante actions to mitigate the shocks on child schooling. In contrast, Malawi relies on private ex-ante actions while public assistance, by and large, is insignificant. The Bangladesh example shows active roles of both ex-ante and ex-post actions. Interestingly, these observations 18