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Wealth And Income Effects Of Natural Disasters: An Econometric Analysis Of Hurricane Hugo

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  • Paulo Guimaraes

    (Universidade de Porto)

  • Frank L. Hefner

    (University of South Carolina)

  • Douglas P. Woodward

    (University of South Carolina)

Abstract

Following natural disasters, many regions face substantial losses of wealth. However, some sectors experience temporary gains in economic activity as a result of insurance claims and other short-term income flows. This paper examines the economic gains and losses from Hurricane Hugo in South Carolina. The analysis is based on a multi-sector regional econometric model, which allows us to examine the state's economy "with and without" the storm. We first obtained estimates based on pre-Hugo period data. Then, we simulated the state's economy in the post-Hugo period based on the actual values of national economic variables during the reconstruction period-yielding the "without" storm estimates. We found that the income gains were neutral overall, despite a major surge in some sectors. Even in these sectors, the economic gain remained below the unreimbursed wealth loss. Thus, the catastrophe had a net negative economic effect.

Suggested Citation

  • Paulo Guimaraes & Frank L. Hefner & Douglas P. Woodward, 1993. "Wealth And Income Effects Of Natural Disasters: An Econometric Analysis Of Hurricane Hugo," The Review of Regional Studies, Southern Regional Science Association, vol. 23(2), pages 97-114, Fall.
  • Handle: RePEc:rre:publsh:v23:y:1993:i:2:p:97-114
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    Cited by:

    1. Greenberg, Michael & Mantell, Nancy & Lahr, Michael & Felder, Frank & Zimmerman, Rae, 2007. "Short and intermediate economic impacts of a terrorist-initiated loss of electric power: Case study of New Jersey," Energy Policy, Elsevier, vol. 35(1), pages 722-733, January.
    2. Daniel Albalate & Gabriel R. Padró-Rosario, 2018. "“The Economic Cost of A Hurricane: A Case Study of Puerto Rico and Hurricane Georges 1998 Using Synthetic Control Method”," IREA Working Papers 201827, University of Barcelona, Research Institute of Applied Economics, revised Nov 2018.
    3. Aaron B. Gertz & James B. Davies & Samantha L. Black, 2019. "A CGE Framework for Modeling the Economics of Flooding and Recovery in a Major Urban Area," Risk Analysis, John Wiley & Sons, vol. 39(6), pages 1314-1341, June.
    4. Ariel R. Belasen & Solomon W. Polachek, 2009. "How Disasters Affect Local Labor Markets: The Effects of Hurricanes in Florida," Journal of Human Resources, University of Wisconsin Press, vol. 44(1).
    5. David G. Lenze, 1997. "Dynamic and Spatial Impact of Hurricane Andrew on Florida'S Taxable Sales: An Intervention Analysis," The Review of Regional Studies, Southern Regional Science Association, vol. 27(2), pages 163-183, Fall.
    6. Thompson Mark A, 2009. "Hurricane Katrina and Economic Loss: An Alternative Measure of Economic Activity," Journal of Business Valuation and Economic Loss Analysis, De Gruyter, vol. 4(2), pages 1-11, April.
    7. Ariel R. Belasen & Solomon W. Polachek, 2008. "How Hurricanes Affect Wages and Employment in Local Labor Markets," American Economic Review, American Economic Association, vol. 98(2), pages 49-53, May.
    8. Bradley T. Ewing & Daan Liang & Yuepeng Cui, 2014. "A Time Series Approach to Examining Regional Economic Resiliency to Hurricanes," American Journal of Economics and Sociology, Wiley Blackwell, vol. 73(2), pages 369-391, April.
    9. Ewing Bradley T. & Kruse Jamie Brown & Sutter Daniel, 2009. "An Overview of Hurricane Katrina and Economic Loss," Journal of Business Valuation and Economic Loss Analysis, De Gruyter, vol. 4(2), pages 1-14, April.
    10. 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.
    11. Ewing, Bradley T. & Kruse, Jamie Brown & Thompson, Mark A., 2004. "Employment Dynamics and the Nashville Tornado," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 34(4), pages 1-14.
    12. Mary Downton & Roger Pielke, 2005. "How Accurate are Disaster Loss Data? The Case of U.S. Flood Damage," 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. 35(2), pages 211-228, June.
    13. Rayenda Brahmana & Chin hong Puah & Michael Chai, 2016. "Natural Disaster and Local Bank Non-Performing Loan: Case of Nias Tsunami 2004," Economics Bulletin, AccessEcon, vol. 36(4), pages 2413-2421.
    14. Julie Zissimopoulos & Lynn Karoly, 2010. "Employment and self-employment in the wake of Hurricane Katrina," Demography, Springer;Population Association of America (PAA), vol. 47(2), pages 345-367, May.
    15. Sutter Daniel & Ewing Bradley T., 2016. "State of Knowledge of Economic Value of Current and Improved Hurricane Forecasts," Journal of Business Valuation and Economic Loss Analysis, De Gruyter, vol. 11(1), pages 45-64, June.
    16. Edmiston, Kelly D., 2017. "Financial Vulnerability and Personal Finance Outcomes of Natural Disasters," Research Working Paper RWP 17-9, Federal Reserve Bank of Kansas City.
    17. Robert A. Baade & Robert Baumann & Victor Matheson, 2007. "Estimating the Economic Impact of Natural and Social Disasters, with an Application to Hurricane Katrina," Urban Studies, Urban Studies Journal Limited, vol. 44(11), pages 2061-2076, October.
    18. Maria Marshall & Holly Schrank, 2014. "Small business disaster recovery: a research framework," 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. 72(2), pages 597-616, June.
    19. Yu Xiao, 2011. "Local Economic Impacts Of Natural Disasters," Journal of Regional Science, Wiley Blackwell, vol. 51(4), pages 804-820, October.
    20. Belasen, Ariel R. & Polachek, Solomon, 2008. "How Hurricanes Affect Employment and Wages in Local Labor Markets," IZA Discussion Papers 3407, Institute of Labor Economics (IZA).
    21. Walker Douglas M & Jackson John D, 2009. "Katrina and the Gulf States Casino Industry," Journal of Business Valuation and Economic Loss Analysis, De Gruyter, vol. 4(2), pages 1-17, April.
    22. Shaughnessy, Timothy M. & White, Mary L. & Brendler, Michael D., 2010. "The Income Distribution Effect of Natural Disasters: An Analysis of Hurricane Katrina," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 40(1), pages 1-12.
    23. Bradley Ewing & Jamie Kruse & Mark Thompson, 2009. "Twister! Employment responses to the 3 May 1999 Oklahoma City tornado," Applied Economics, Taylor & Francis Journals, vol. 41(6), pages 691-702.

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