Estimating how asset losses translate into income losses is difficult. Asset inventories are needed not only of assets that people own, but also on the complementary assets such as transportation infrastructure and production facilities that people use to make a living, as well as some information on the vulnerability of assets owned and used. According to the linkages presented in **Section 2** , the effect of a disaster on a household’s income strategy depends on employment in the firms nearby, and in the case of selfemployment, changes in demand for goods. For example, after the 2011 floods in Bangkok, Thailand, (Noy and Patel, 2014) quantify the direct and spillover effects on income. Households who were directly affected lost on average THB 7,600 (approximately USD $220) in income; households not directly affected by the flood lost almost as much due to reduction in demand or business interruption and ripple-effects: THB 6,700.

A third component that moderates or magnifies the impact of asset loss on income loss is the diversification of income, including from transfers such as pensions, social protection, and remittances. The impact on households’ income of the loss of local activities can be smoothed from income sources less affected by a disaster. In particular, government transfers such as pensions and social protection are diversified at the country-level, and if a disaster only impacts a small part of the country, transfers be only slightly reduced.<sup>11</sup> Given impacts on income after the disaster, access to private and public coping strategies can reduce the welfare impact of an income loss.

Strategies include private financial mechanisms as well as government targeted interventions and more generally social protection. Government transfers can be made available for a period of time after the disaster occurs to allow households to recover from the shock. After the 2005 floods in Mumbai, households received compensation from the government amounting to on average 10% of household asset losses (Patankar and Patwardhan, 2014). However, the compensation scheme did not appear to target poor people or those who lost the most (as is also found after the 2011 flood in Thailand, (Noy and Patel, 2014)). More generally, a socio-economic environment with a subsidized health care system and opportunities for employment can reduce welfare losses.

Financial inclusion can also help. Savings accounts and insurance can smooth the impact of a shock over time. However, in most developing countries, while access to finance is slowly improving globally (Van Oudheusden et al., 2015), the ability for poor households to access such services remains limited. Another coping strategy at the household level is voluntary migration, of the entire family or one member of the family. However, evidence from rural Bangladesh suggests that poor households do not take advantage of migration opportunities, due to the cost of migration and possibility of not finding a job opportunity in a city (World Bank, 2013).

A long reconstruction process, strong linkages between asset destruction and income generation, and few opportunities to smooth the shock through social protection or insurance increase the welfare impact of a disaster.

> 11 This is true in large countries. However, in small islands where almost all of the population is affected by a disaster, risk-sharing through diversification may not be an option.

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