Does natural disaster influence people's risk preference and trust? An experiment from cyclone prone coast of Bangladesh

Natural catastrophic events may have enormous negative effects on economic growth. People affected by the disaster might be risk averse because of anxiety about the future uncertainty of economic returns. The purpose of this empirical study is to highlight the effect of natural disasters (specifically coastal cyclonic storm surges) on individuals' risk preference and level of trust. This study also aims to disentangle risk propensity from trust. It reveals that natural disasters can significantly reduce people's risk taking attitudes, whereas the catastrophic events have no influence on trusting behavior. The study suggests that risk attitudes are significantly negatively correlated with trust. (C) 2014 Elsevier Ltd. All rights reserved.