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Does rising income increase or decrease damage risk from natural disasters?

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  • Kellenberg, Derek K.
  • Mobarak, Ahmed Mushfiq

Abstract

Recent empirical literature has found a negative relationship between income per capita and measures of risk from natural disaster, supportive of logic that higher incomes allow countries to mitigate disaster risk. We argue that behavioral changes at the micro level in response to increasing income (such as location choice and extent of costly abatement activity) may lead to a non-linear relationship between aggregate incomes and disaster damages, where the risks increase with income before they decrease. In a country-year panel data set, we show that disaster risk associated with flooding, landslides and windstorms increases with income up to GDP per capita levels of $5044, $3360, and $4688 per year respectively and decrease thereafter. Such non-linear impacts are absent for other disaster types such as extreme temperature events and earthquakes where the links between human behavioral choices and exposure to risk are not as strong. From a policy perspective, this suggests that for the least developed countries, the dual goals of disaster risk prevention and economic development cannot be assumed to be complementary for all forms of natural disaster. In addition to allocating resources to manage disaster risk, the poorest nations may have to be more proactive in enacting policies that alter the behavioral choices of citizens that impact a country's exposure to natural disaster risk.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Urban Economics.

Volume (Year): 63 (2008)
Issue (Month): 3 (May)
Pages: 788-802

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Handle: RePEc:eee:juecon:v:63:y:2008:i:3:p:788-802

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Web page: http://www.elsevier.com/locate/inca/622905

Related research

Keywords: Economic development Natural disaster Kuznets curve Urbanization;

References

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  1. Nicole Cornell Sadowski & Daniel Sutter, 2005. "Hurricane Fatalities and Hurricane Damages: Are Safer Hurricanes More Damaging?," Southern Economic Journal, Southern Economic Association, vol. 72(2), pages 422–432, October.
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  4. Neil Adger, W., 1999. "Social Vulnerability to Climate Change and Extremes in Coastal Vietnam," World Development, Elsevier, vol. 27(2), pages 249-269, February.
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  9. Kunreuther, Howard, 1996. "Mitigating Disaster Losses through Insurance," Journal of Risk and Uncertainty, Springer, vol. 12(2-3), pages 171-87, May.
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  12. Brookshire, David S, et al, 1985. "A Test of the Expected Utility Model: Evidence from Earthquake Risks," Journal of Political Economy, University of Chicago Press, vol. 93(2), pages 369-89, April.
  13. Vernon Henderson, 2002. "Urbanization in Developing Countries," World Bank Research Observer, World Bank Group, vol. 17(1), pages 89-112.
  14. Austin Troy & Jeff Romm, 2004. "Assessing the price effects of flood hazard disclosure under the California natural hazard disclosure law (AB 1195)," Journal of Environmental Planning and Management, Taylor and Francis Journals, vol. 47(1), pages 137-162.
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Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Could the World Death Count from Natural Disasters Start to Decline Despite Climate Change?
    by Matthew E. Kahn in Environmental and Urban Economics on 2010-09-25 21:25:00
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
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Cited by:
  1. Liu, Jing, 2012. "Weather or Wealth: An Analysis of Property Loss Caused by Flooding in the U.S," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124992, Agricultural and Applied Economics Association.
  2. Yamamura, Eiji, 2011. "Effect of free media on views regarding the safety of nuclear energy after the 2011 disasters in Japan: evidence using cross-country data," MPRA Paper 32011, University Library of Munich, Germany.
  3. Yamamura, Eiji, 2011. "The changing effect of legal origin on death tolls in natural disasters from 1960 to 2008," MPRA Paper 33112, University Library of Munich, Germany.
  4. Mark Skidmore & Hideki Toya, 2013. "Natural Disaster Impacts and Fiscal Decentralization," Land Economics, University of Wisconsin Press, vol. 89(1), pages 101-117.
  5. Yamamura, Eiji, 2012. "Natural disasters and their long-term effect on happiness: the case of the great Hanshin-Awaji earthquake," MPRA Paper 37505, University Library of Munich, Germany.
  6. McDermott, Thomas K. J. & Barry, Frank & Tol, Richard S. J., 2011. "Disasters and Development: Natural Disasters, Credit Constraints and Economic Growth," Papers WP411, Economic and Social Research Institute (ESRI).
  7. Eduardo Cavallo & Ilan Noy, 2009. "The Economics of Natural Disasters - A Survey," Working Papers 200919, University of Hawaii at Manoa, Department of Economics.
  8. Yamamura, Eiji, 2011. "Public sector corruption and the probability of technological disasters," MPRA Paper 32012, University Library of Munich, Germany.
  9. Kousky, Carolyn, 2012. "Informing Climate Adaptation: A Review of the Economic Costs of Natural Disasters, Their Determinants, and Risk Reduction Options," Discussion Papers dp-12-28, Resources For the Future.
  10. Okuyama, Yasuhide & Sahin, Sebnem, 2009. "Impact estimation of disasters : a global aggregate for 1960 to 2007," Policy Research Working Paper Series 4963, The World Bank.
  11. Raddatz, Claudio, 2009. "The wrath of God : macroeconomic costs of natural disasters," Policy Research Working Paper Series 5039, The World Bank.
  12. Yamamura, Eiji, 2012. "Death tolls from natural disasters: Influence of interactions between fiscal decentralization, institution, and economic development," MPRA Paper 36987, University Library of Munich, Germany.
  13. Ferreira, Susana & Hamilton, Kirk & Vincent, Jeffrey R., 2011. "Nature, socioeconomics and adaptation to natural disasters: new evidence from floods," Policy Research Working Paper Series 5725, The World Bank.
  14. Yamamura, Eiji, 2011. "Institution and decomposition of natural-disaster impact on growth," MPRA Paper 35537, University Library of Munich, Germany.
  15. Ernest Molua, 2012. "Climate extremes, location vulnerability and private costs of property protection in Southwestern Cameroon," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 17(3), pages 293-310, March.
  16. Hallegatte, Stephane, 2012. "A cost effective solution to reduce disaster losses in developing countries : hydro-meteorological services, early warning, and evacuation," Policy Research Working Paper Series 6058, The World Bank.
  17. Hallegatte, Stephane, 2012. "An exploration of the link between development, economic growth, and natural risk," Policy Research Working Paper Series 6216, The World Bank.
  18. Samia Costa, 2012. "Government Repression and the Death Toll from Natural Disasters," CESifo Working Paper Series 3703, CESifo Group Munich.
  19. Eduardo Cavallo & Ilan Noy, 2010. "The Aftermath of Natural Disasters: Beyond Destruction," CESifo Forum, Ifo Institute for Economic Research at the University of Munich, vol. 11(2), pages 25-35, 07.

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