Informality, Adaptive Capacity, and Natural Hazard-Related Disasters: A Partial Least Squares Structural Equation Modeling Exploration of Governance for Disaster Readiness

Abstract This article explores the interplay between the informal economy, adaptive capacity to natural hazard-related disasters, and disaster impact, drawing on annual data from 1993 to 2020 for a sample of 39 disaster-prone countries. The analysis employs the partial least squares structural equation modeling (PLS-SEM) approach, defining four latent constructs representing informality and governance, economic, and social readiness, respectively. The results highlight governance as a foundational driver of resilience: it exerts positive effects on economic (β = 0.672) and social readiness (β = 0.636), while significantly lowering informality (β = − 0.454). Informality, by contrast, undermines governance (β = − 0.454) and economic readiness (β = − 0.230), and directly amplifies disaster impact (β = 0.132). No significant direct effects are observed from governance, economic, or social readiness on disaster impact, underscoring that adaptive capacity operates primarily through indirect pathways. Mediation analysis reveals that informality fully mediates the link between governance readiness and disaster impact, while governance readiness complements the relationship between informality and economic readiness, underscoring the need for policies that strengthen governance and reduce informality to build comprehensive disaster preparedness.