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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.
    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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    Cited by:

    1. Mingze Li & Jun Lv & Xin Chen & Nan Jiang, 2015. "Provincial evaluation of vulnerability to geological disaster in China and its influencing factors: a three-stage DEA-based analysis," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 79(3), pages 1649-1662, December.
    2. Lazzaroni, Sara & van Bergeijk, Peter A.G., 2014. "Natural disasters' impact, factors of resilience and development: A meta-analysis of the macroeconomic literature," Ecological Economics, Elsevier, vol. 107(C), pages 333-346.
    3. Xiao-Chen Yuan & Xun Sun & Upmanu Lall & Zhi-Fu Mi & Jun He & Yi-Ming Wei, 2016. "China’s socioeconomic risk from extreme events in a changing climate: a hierarchical Bayesian model," Climatic Change, Springer, vol. 139(2), pages 169-181, November.
    4. Kousky, Carolyn, 2012. "Informing Climate Adaptation: A Review of the Economic Costs of Natural Disasters, Their Determinants, and Risk Reduction Options," Discussion Papers dp-12-28, Resources For the Future.
    5. Schumacher, Ingmar, 2014. "An Empirical Study of the Determinants of Green Party Voting," Ecological Economics, Elsevier, vol. 105(C), pages 306-318.
    6. Ilan Noy, 2016. "To Leave or Not to Leave? Climate Change, Exit, and Voice on a Pacific Island," CESifo Working Paper Series 6227, CESifo Group Munich.
    7. Fankhauser, Samuel & McDermott, Thomas K. J., 2014. "Understanding the adaptation deficit: why are poor countries more vulnerable to climate events than rich countries?," LSE Research Online Documents on Economics 57620, London School of Economics and Political Science, LSE Library.
    8. Felbermayr, Gabriel & Gröschl, Jasmin, 2014. "Naturally negative: The growth effects of natural disasters," Journal of Development Economics, Elsevier, vol. 111(C), pages 92-106.
    9. Daoud, Adel & Halleröd, Björn & Guha Sapir, Debarati, 2015. "Quality of government and the relationship between natural disasters and child poverty: A comparative analysis," MPIfG Discussion Paper 15/5, Max Planck Institute for the Study of Societies.
    10. Stéphane Hallegatte, 2012. "An exploration of the link between development, economic growth, and natural risk," Post-Print hal-00802047, HAL.
    11. repec:oup:cesifo:v:63:y:2017:i:4:p:403-420. is not listed on IDEAS
    12. Grames, Johanna & Prskawetz, Alexia & Grass, Dieter & Viglione, Alberto & Blöschl, Günter, 2016. "Modeling the interaction between flooding events and economic growth," Ecological Economics, Elsevier, vol. 129(C), pages 193-209.
    13. Yang Zhou & Ning Li & Wenxiang Wu & Jidong Wu, 2014. "Assessment of provincial social vulnerability to natural disasters in China," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 71(3), pages 2165-2186, April.
    14. Samuel Fankhauser & Thomas K.J. McDermott, 2013. "Understanding the adaptation deficit: why are poor countries more vulnerable to climate events than rich countries?," GRI Working Papers 134, Grantham Research Institute on Climate Change and the Environment.
    15. Yang Zhou & Ning Li & Wenxiang Wu & Haolong Liu & Li Wang & Guangxu Liu & Jidong Wu, 2014. "Socioeconomic development and the impact of natural disasters: some empirical evidences from China," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 74(2), pages 541-554, November.
    16. Kousky, Carolyn, 2014. "Informing climate adaptation: A review of the economic costs of natural disasters," Energy Economics, Elsevier, vol. 46(C), pages 576-592.
    17. Laura A. Bakkensen & Robert O. Mendelsohn, 2016. "Risk and Adaptation: Evidence from Global Hurricane Damages and Fatalities," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 3(3), pages 555-587.
    18. Rajapaksa, Darshana & Islam, Moinul & Managi, Shunsuke, 2017. "Natural capital depletion: The impact of natural disasters on inclusive growth," MPRA Paper 79277, University Library of Munich, Germany, revised May 2017.
    19. Davlasheridze, Meri & Fisher-Vanden, Karen & Allen Klaiber, H., 2017. "The effects of adaptation measures on hurricane induced property losses: Which FEMA investments have the highest returns?," Journal of Environmental Economics and Management, Elsevier, vol. 81(C), pages 93-114.
    20. Miao, Qing & Popp, David, 2014. "Necessity as the mother of invention: Innovative responses to natural disasters," Journal of Environmental Economics and Management, Elsevier, vol. 68(2), pages 280-295.
    21. Yang Zhou & Ning Li & Wenxiang Wu & Jidong Wu & Xiaotian Gu & Zhonghui Ji, 2013. "Exploring the characteristics of major natural disasters in China and their impacts during the past decades," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 69(1), pages 829-843, October.
    22. repec:eee:wdevel:v:99:y:2017:i:c:p:395-418 is not listed on IDEAS

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