On the political economy of allocation of agricultural disaster relief payments: application to Taiwan Hung-Hao Chang † * and David Zilberman ‡ † National Taiwan University, Taipei, Taiwan; ‡ University of California at Berkeley, USA Received August 2012; final version accepted September 2013 Review coordinated by Christoph Weiss Abstract This paper examines the importance of political factors in the allocation of agricultural disaster payments as a result of Typhoon Morakot that ravaged Taiwan in 2009. The in- strumental variable model was estimated using a unique data set that combines a national administrative profile of the 607,704 recipients of disaster relief payments and the matched weather and geographic information. Results show that the political factor sig- nificantly determined the level of disaster relief payments. The incumbent government paid more to the farms located in towns which voted for the incumbent party to a greater extent than they did for the opposition party. Keywords: agricultural disaster relief payment, political economy, typhoon, Taiwan JEL classification: Q18, Q58, D72 1. Introduction Compared with other industries, agricultural production is weather-dependent. Extreme temperatures and persistent heavy rainfall, droughts and floods result in crop failures, impacting farmers’ wellbeing. Farmers are vulnerable to exogenous natural disaster shocks, especially crop farmers (Benson, 2000; Fischer, Shah and Velthuizen, 2002). Agricultural policies are designed to miti- gate the losses farmers suffer as a result of natural disasters. In many countries, similar policy tools exist. For instance, the Federal Emergency Management Agency (FEMA) disaster assistance programme in the United States provides supplementary aid to farmers who have suffered from natural disasters. Ideally, these payments should be solely determined by the severity of the weather conditions and subsequent damage if the maximisation of social *Corresponding author: Department of Agricultural Economics, National Taiwan University, No1, Roosevelt Rd, Sec 4, Taipei, Taiwan. E-mail: hunghaochang@ntu.edu.tw European Review of Agricultural Economics Vol 41 (4) (2014) pp. 657–680 doi:10.1093/erae/jbt037 Advance Access Publication 12 December 2013 # Oxford University Press and Foundation for the European Review of Agricultural Economics 2013; all rights reserved. For permissions, please email journals.permissions@oup.com at National Taiwan University on August 4, 2014 http://erae.oxfordjournals.org/ Downloaded from