Natural Disasters and the Economy — A Survey

This paper surveys the state of the economic literature examining the aggregate impacts of natural disasters. The paper reviews the main disaster data sources available discusses the determinants of the direct effects of disasters and distinguishes between short-and long-run indirect effects. The paper then examines some of the relevant policy questions and follows up with a survey of current projections about the likelihood of future disasters. The paper ends by identifying several significant gaps in the literature.

Earthquake fatalities: the interaction of nature and political economy

To say that the level of fatalities resulting from an earthquake is inversely related to a country's per capita level of income is hardly novel. What makes our approach novel is that we relate fatalities to both per capita income and the level of inequality that exists within a country through their joint impact on the likelihood of collective action being taken to mitigate the destructive potential of quakes.

Understanding the Economic and Financial Impacts of Natural Disasters

This report explores the macro-economic and public finance implications of natural disasters, including the role of information and mechanisms for risk spreading, and drawing in particular on evidence from Bangladesh, Dominica, and Malawi. Major natural disasters can have severe negative short-run economic and budgetary impacts. Disasters also appear to have adverse longer-term consequences for economic growth, development, and poverty reduction. However, negative impacts are not inevitable: sensitivity to natural hazards is determined by a complex, dynamic set of influences.

Sovereign financial disaster risk management: The case of Mexico

In 2006, Mexico became the first transition country to transfer part of its public-sector natural catastrophe risk to the international reinsurance and capital markets. The Mexican case is of considerable interest to highly exposed transition and developing countries, many of which are considering similar transactions. Risk financing instruments can assure governments of sufficient post-disaster capital to provide emergency response, disaster relief to the affected population, and repair public infrastructure.

Natural Disasters as creative destruction? Evidence from developing countries

Recent studies found a robust positive correlation between the frequency of natural disasters and the long-run economic growth after conditioning for other determinants. This result is interpreted as evidence that disasters provide opportunities to update the capital stock and adopt new technologies, thus acting as some type of Schumpeterian creative destruction. The results of cross-country and panel data regressions indicate that the degree of catastrophic risk tends to have a negative effect on the volume of knowledge spillovers between industrialized and developing countries.

Urban disaster recovery: a measurement framework and its application to the 1995 Kobe earthquake

This paper provides a framework for assessing empirical patterns of urban disaster recovery through the use of statistical indicators. Such a framework is needed to develop systematic knowledge on how cities recover from disasters. The proposed framework addresses such issues as defining recovery, filtering out exogenous influences unrelated to the disaster, and making comparisons across disparate areas or events. It is applied to document how Kobe City, Japan, recovered from the catastrophic 1995 earthquake.

Estimating the Direct Economic Damages of the Earthquake in Haiti

This article makes an initial assessment of the monetary damages caused by the 2010 earthquake in Haiti. Damages are estimated for a disaster with both 200,000 and 250,000 total dead and missing, using Haiti's economic and demographic data. The base estimate is US$8.1bn, but for several reasons, this may be a lower-bound estimate. While the results are subject to many caveats, including possibly high forecast error, the implications of such an estimate are significant. Raising such a figure will require many donors.

An Adaptive Regional Input-Output Model and its Application to the Assessment of the Economic Cost of Katrina

This article proposes a new modeling framework to investigate the consequences of natural disasters and the following reconstruction phase. Based on input-output tables, its originalities are (1) the taking into account of sector production capacities and of both forward and backward propagations within the economic system; and (2) the introduction of adaptive behaviors. The model is used to simulate the response of the economy of Louisiana to the landfall of Katrina. The model is found consistent with available data, and provides two important insights.

Why economic dynamics matter in assessing climate change damages: Illustration on extreme events

Extreme events are one of the main channels through which climate and socio-economic systems interact, and it is likely that climate change will modify the probability distribution of the losses they generate. The long-term growth models used in climate change assessments, however, cannot capture the effects of such short-term shocks. To investigate this issue, a non-equilibrium dynamic model (NEDyM) is used to assess the macroeconomic consequences of extreme events.