Disaster recovery depends critically on the speed and predictability of assistance. This paper studies how Mexico’s indexed disaster fund (FONDEN) affects household coping strategies and recovery trajectories. By providing rapid, rules-based disbursements triggered by objective disaster measures, FONDEN reduces uncertainty and enables households to invest in recovery rather than just survival.
We find that access to indexed funds substantially accelerates economic recovery, with effects persisting years after the initial shock. The research highlights the importance of institutional design in disaster response.