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The Unlikeliness of an Economic Catastrophe: Localization & Globalization

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Abstract

This paper attempts to show why it is highly unlikely that a disaster can become a catastrophe. We first put forward an economic concept of disaster localization. This shows that a localized disaster is unlikely to affect the macro economy in any significant way and that economic development itself tends to make most disasters localized as an incidental consequence of its endogenous processes. We then show that the effect of current globalization on vulnerability seems to be double-edged. It may increase local vulnerability by disenfranchising communities and adding new sources of economic instability. But it may also speed up the downgrading of vulnerability at the national level by contributing to upgrade localization, further reducing the possibility of a catastrophe. It is therefore, difficult to imagine a realistic scenario in which a disaster could become catastrophic, even less so in developed countries.

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File URL: http://www.econ.qmul.ac.uk/papers/doc/wp576.pdf
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Bibliographic Info

Paper provided by Queen Mary, University of London, School of Economics and Finance in its series Working Papers with number 576.

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Date of creation: Oct 2006
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Handle: RePEc:qmw:qmwecw:wp576

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Keywords: Catastrophe; Disaster escalation; Localization; Globalization; Vulnerability;

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References

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  1. Weller, Christian E., 1999. "Financial crises after financial liberalization: Exceptional circumstances or structural weakness?," ZEI Working Papers B 15-1999, ZEI - Center for European Integration Studies, University of Bonn.
  2. J. M. Albala-Bertrand, 1999. "Industrial Interdependence Change in Chile: 1960-90 a comparison with Taiwan and South Korea," International Review of Applied Economics, Taylor & Francis Journals, vol. 13(2), pages 161-191.
  3. Taylor, Lance, 1994. "Gap models," Journal of Development Economics, Elsevier, vol. 45(1), pages 17-34, October.
  4. JosÈ M. Albala-Bertrand & Emmanuel C. Mamatzakis, 2004. "The Impact of Public Infrastructure on the Productivity of the Chilean Economy," Review of Development Economics, Wiley Blackwell, vol. 8(2), pages 266-278, 05.
  5. J. M. Albala-Bertrand, 2000. "Complex Emergencies versus Natural Disasters: An Analytical Comparison of Causes and Effects," Oxford Development Studies, Taylor & Francis Journals, vol. 28(2), pages 187-204.
  6. Kunreuther, Howard, 1996. "Mitigating Disaster Losses through Insurance," Journal of Risk and Uncertainty, Springer, vol. 12(2-3), pages 171-87, May.
  7. Albala-Bertrand, J. M., 1993. "Natural disaster situations and growth: A macroeconomic model for sudden disaster impacts," World Development, Elsevier, vol. 21(9), pages 1417-1434, September.
  8. Rudra, Nita, 2002. "Globalization and the Decline of the Welfare State in Less-Developed Countries," International Organization, Cambridge University Press, vol. 56(02), pages 411-445, March.
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Cited by:
  1. Hochrainer, Stefan, 2009. "Assessing the macroeconomic impacts of natural disasters : are there any ?," Policy Research Working Paper Series 4968, The World Bank.
  2. Mechler, Reinhard, 2009. "Disasters and economic welfare : can national savings help explain post-disaster changes in consumption ?," Policy Research Working Paper Series 4988, The World Bank.

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