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On the Social Cost of Water-Related Disasters

Author

Listed:
  • Per-Olov Johansson

    (Stockholm School of Economics, Stockholm, Sweden)

  • Bengt Kriström

    (Swedish University of Agricultural Sciences, Umeå, Sweden;
    Centre for Environmental and Resource Economics, Umeå University, Sweden)

Abstract

This paper is devoted to some important welfare economic issues related to natural disasters, in particular those connected with floods and storms. Our analysis of the social cost of a natural disaster is different from (most) existing analyses, in that we focus sharply on the welfare effects of a disaster. We derive a simple dynamic general equilibrium cost–benefit rule, which captures loss in production of private and public goods, as well as the value of (statistical) lives lost; it also clarifies the role played by changes in stocks and flows, respectively. Standard analysis of losses typically only includes damages to market-priced stocks and flows, thus our model paints a different picture of social cost. This difference is particularly striking for disaster that results in many deaths, but has relatively low (reported) costs. We take our model to the data by using EM-DAT, one of the several prominent databases in this literature, focusing on water-related disasters in the US.

Suggested Citation

  • Per-Olov Johansson & Bengt Kriström, 2015. "On the Social Cost of Water-Related Disasters," Water Economics and Policy (WEP), World Scientific Publishing Co. Pte. Ltd., vol. 1(03), pages 1-26.
    • Handle: RePEc:wsi:wepxxx:v:01:y:2015:i:03:n:s2382624x15500150
    DOI: 10.1142/S2382624X15500150
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    References listed on IDEAS

    as
    1. Johansson,Per-Olov & Kriström,Bengt, 2015. "Cost-Benefit Analysis for Project Appraisal," Cambridge Books, Cambridge University Press, number 9781107121027.
    2. Baker, Scott R. & Bloom, Nicholas, 2013. "Does uncertainty reduce growth? Using disasters as natural experiments," LSE Research Online Documents on Economics 121906, London School of Economics and Political Science, LSE Library.
    3. Auffret, Philippe, 2003. "High consumption volatility : the impact of natural disasters?," Policy Research Working Paper Series 2962, The World Bank.
    4. Robert J. Barro, 2015. "Environmental Protection, Rare Disasters and Discount Rates," Economica, London School of Economics and Political Science, vol. 82(325), pages 1-23, January.
    5. Ian W. R. Martin & Robert S. Pindyck, 2015. "Averting Catastrophes: The Strange Economics of Scylla and Charybdis," American Economic Review, American Economic Association, vol. 105(10), pages 2947-2985, October.
    6. Rentschler, Jun E., 2013. "Why resilience matters - the poverty impacts of disasters," Policy Research Working Paper Series 6699, The World Bank.
    7. Charlotte Benson & Edward J. Clay, 2004. "Understanding the Economic and Financial Impacts of Natural Disasters," World Bank Publications - Books, The World Bank Group, number 15025, December.
    8. Johansson,Per-Olov & Kriström,Bengt, 2015. "Cost-Benefit Analysis for Project Appraisal," Cambridge Books, Cambridge University Press, number 9781107548220.
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