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The impact of preemptive investment on natural disasters

Author

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  • Jhorland Ayala-García
  • Sandy Dall’Erba

Abstract

Extreme rainfall events are expected to become more frequent and more intense in the future. Because their mitigation is a challenge and their cost to human life is large, this paper studies the impact of preemptive investment against natural disasters on the future occurrence of landslides and the losses associated with it. Based on a panel of 746 Colombian municipalities with medium and high risk of landslides and an instrumental variable approach, we find that preemptive public investment can reduce the number of landslides, the number of people who die, are injured, or disappear after a landslide, as well as the number of people affected. However, we do not find any effect on the number of houses destroyed. The results reveal that local governments focus their preventive measures on saving the lives and the physical integrity of their citizens, but they pay less attention to the direct market losses of natural disasters. These results are relevant in the presence of imperfect private insurance markets and increased informal settlements. **** RESUMEN: Se espera que los eventos de lluvias extremas sean más frecuentes e intensos en el futuro. Debido a que su mitigación es un desafío y su costo para la vida humana es alto, este documento estudia el impacto de la inversión en prevención contra desastres naturales en la ocurrencia futura de deslizamientos de tierra y las pérdidas asociadas a los mismos. Con base en un panel de 746 municipios colombianos con riesgo medio y alto de deslizamientos de tierra y un enfoque de variable instrumental, encontramos que la inversión pública en prevención puede reducir la frecuencia de los deslizamientos de tierra, la cantidad de personas que mueren, resultan heridas o desaparecen después de un deslizamiento de tierra, así como el número de personas afectadas. Sin embargo, no encontramos ningún efecto sobre el número de viviendas destruidas. Los resultados revelan que los gobiernos locales enfocan sus medidas preventivas en salvar la vida y la integridad física de sus ciudadanos, pero prestan menos atención a las pérdidas de activos como consecuencia de los desastres naturales. Estos resultados son relevantes en presencia de mercados de seguros privados imperfectos y un aumento de asentamientos informales.

Suggested Citation

  • Jhorland Ayala-García & Sandy Dall’Erba, 2021. "The impact of preemptive investment on natural disasters," Documentos de trabajo sobre Economía Regional y Urbana 301, Banco de la Republica de Colombia.
    • Handle: RePEc:bdr:region:301
    DOI: 10.32468/dtseru.301
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    More about this item

    Keywords

    Landslides; preemptive investment; disaster risk reduction; natural disasters; deslizamientos de tierra; inversión en prevención; reducción del riesgo de desastres naturales; desastres naturales;
    All these keywords.

    JEL classification:

    • H1 - Public Economics - - Structure and Scope of Government
    • H4 - Public Economics - - Publicly Provided Goods
    • H5 - Public Economics - - National Government Expenditures and Related Policies
    • C26 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Instrumental Variables (IV) Estimation
    • D6 - Microeconomics - - Welfare Economics

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