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Economic development and losses due to natural disasters: The role of hazard exposure

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  • Schumacher, Ingmar
  • Strobl, Eric

Abstract

Our contribution is to show that the relationship between wealth and disasters is mainly formed by the exposure to disaster hazard. We first build a simple analytical model that demonstrates how countries that face a low hazard of disasters are likely to see first increasing losses and then decreasing ones with increasing economic development. At the same time, countries that face a high hazard of disasters are likely to experience first decreasing losses and then increasing ones with increasing economic development. We then use a cross-country panel dataset in conjunction with a hazard exposure index to investigate whether the data is consistent with the predictions from the model. In line with our model, we find that the relationship of losses with wealth crucially depends on the level of hazard of natural disasters faced by countries.

Suggested Citation

  • Schumacher, Ingmar & Strobl, Eric, 2011. "Economic development and losses due to natural disasters: The role of hazard exposure," Ecological Economics, Elsevier, vol. 72(C), pages 97-105.
  • Handle: RePEc:eee:ecolec:v:72:y:2011:i:c:p:97-105
    DOI: 10.1016/j.ecolecon.2011.09.002
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    References listed on IDEAS

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    1. Ingmar Schumacher & Eric Strobl, 2008. "Economic development and losses due to natural disasters: the role of risk," Working Papers hal-00356286, HAL.
    2. Maxx Dilley & Robert S. Chen & Uwe Deichmann & Arthur L. Lerner-Lam & Margaret Arnold, 2005. "Natural Disaster Hotspots: A Global Risk Analysis," World Bank Publications, The World Bank, number 7376, December.
    3. Matthew E. Kahn, 2005. "The Death Toll from Natural Disasters: The Role of Income, Geography, and Institutions," The Review of Economics and Statistics, MIT Press, vol. 87(2), pages 271-284, May.
    4. Lewis, Tracy & Nickerson, David, 1989. "Self-insurance against natural disasters," Journal of Environmental Economics and Management, Elsevier, vol. 16(3), pages 209-223, May.
    5. Toya, Hideki & Skidmore, Mark, 2007. "Economic development and the impacts of natural disasters," Economics Letters, Elsevier, vol. 94(1), pages 20-25, January.
    6. Anbarci, Nejat & Escaleras, Monica & Register, Charles A., 2005. "Earthquake fatalities: the interaction of nature and political economy," Journal of Public Economics, Elsevier, vol. 89(9-10), pages 1907-1933, September.
    7. Kellenberg, Derek K. & Mobarak, Ahmed Mushfiq, 2008. "Does rising income increase or decrease damage risk from natural disasters?," Journal of Urban Economics, Elsevier, vol. 63(3), pages 788-802, May.
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