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Normalizing economic loss from natural disasters: a global analysis

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  • Eric Neumayer
  • Fabian Barthel

Abstract

Climate change is likely to lead to an increase in the frequency and/or intensity of certain types of natural hazards, if not globally, then at least in certain regions. All other things equal, this should lead to an increase in the economic toll from natural disasters over time. Yet, all other things are not equal since affected areas become wealthier over time and rational individuals and governments undertake defensive mitigation measures, which requires normalizing economic losses if one wishes to analyze trends in economic loss from natural disasters for detecting a potential climate change signal. In this article, we argue that the conventional methodology for normalizing economic loss is problematic since it normalizes for changes in wealth over time, but fails to normalize for differences in wealth across space at any given point of time. We introduce an alternative methodology that overcomes this problem in theory, but faces many more problems in its empirical application. Applying, therefore, both methods to the most comprehensive existing global dataset of natural disaster loss, in general we find no significant upward trends in normalized disaster damage over the period 1980 to 2009 globally, regionally, for specific disasters or for specific disasters in specific regions. Due to our inability to control for defensive mitigation measures, one cannot infer from our analysis that there have definitely not been more frequent and/or more intensive weather-related natural hazards over the study period already. Moreover, it may still be far too early to detect a trend if humaninduced climate change has only just started and will gain momentum over time.

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File URL: http://www.lse.ac.uk/GranthamInstitute/publications/WorkingPapers/Papers/WPapers30-39/economic-loss-natural-disasters_Nov10.pdf
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Bibliographic Info

Paper provided by Grantham Research Institute on Climate Change and the Environment in its series Grantham Research Institute on Climate Change and the Environment Working Papers with number 31.

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Date of creation: Nov 2010
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Handle: RePEc:lsg:lsgwps:wp31

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  1. Silvio Schmidt & Claudia Kemfert & Peter Höppe, 2008. "Tropical Cyclone Losses in the USA and the Impact of Climate Change: A Trend Analysis Based on a New Dataset," Discussion Papers of DIW Berlin 802, DIW Berlin, German Institute for Economic Research.
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Cited by:
  1. Nicola Ranger & Falk Niehörster, 2011. "Deep uncertainty in long-term hurricane risk: scenario generation and implications for future climate experiments," Grantham Research Institute on Climate Change and the Environment Working Papers 51, Grantham Research Institute on Climate Change and the Environment.
  2. Brecht, Henrike & Deichmann, Uwe & Wang, Hyoung Gun, 2013. "A global urban risk index," Policy Research Working Paper Series 6506, The World Bank.

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