| Summary: | This paper combines district-level government spending data from Indonesia and natural disaster damage indices to analyze the extent to which districts are forced to reallocate their expenditures across categories after the incidence of floods, earthquakes, and volcanic eruptions. The results reveal that district government spending is quite sensitive to the incidence of natural disasters at the local level. In the case of floods, districts reallocate spending away from the category of general administration to sectors such as health and infrastructure. Moreover, volcanic eruptions seem to lead to less investment in durable assets both in the year of the disaster as well as the following year. Overall, these results highlight the potentially useful role of a national disaster risk financing insurance program toward maintaining a relatively stable level of district-level spending in different sectors
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