Resilience in the Wake of Disaster: The Role of Social Capital in Mitigating Long-Term Well-Being Losses

Climate change is intensifying the frequency and severity of weather-related natural disasters, including hurricanes, floods, wildfires, and earthquakes, with devastating effects on millions of lives annually. These events generate significant monetary and non-monetary costs, undermining individual and societal well-being. Using a nationally representative longitudinal dataset from Australia, this study explores the dynamics of well-being before, during, and after natural disasters, with a particular focus on the mediating role of social capital. We employ an event-study design with individual fixed-effects to capture both immediate and long-term effects of natural disasters on four critical dimensions of well-being: financial satisfaction, safety satisfaction, mental health, and psychological distress. Our findings reveal that the adverse impacts of natural disasters are profound and long-lasting, persisting in some cases for over 6 to 7 years, with well-being implications exceeding $1,500,000 in equivalent losses. We find that social capital emerges as a powerful buffer, significantly mitigating declines in safety satisfaction and mental health while reducing psychological distress both during and after disasters. These results suggest that social capital is an intangible asset that extends beyond economic compensation, fostering resilience and enhancing recovery outcomes in populations affected by natural disasters. JEL codes : J21, I31, G50, C23