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Direct Estimation of the Cost Effectiveness of Tornado Shelters

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  • Kevin M. Simmons
  • Daniel Sutter

Abstract

This article estimates the cost effectiveness of tornado shelters using the annual probability of a tornado and new data on fatalities per building struck by a tornado. This approach differs from recent estimates of the cost effectiveness of tornado shelters in Reference 1 that use historical casualties. Historical casualties combine both tornado risk and resident action. If residents of tornado‐prone states take greater precautions, observed fatalities might not be much higher than in states with lower risk. Estimation using the tornado probability avoids this potential bias. Despite the very different method used, the estimates are $68 million in permanent homes and $6.0 in mobile homes in Oklahoma using a 3% real discount rate, within about 10% of estimates based on historical fatalities. The findings suggest that shelters provide cost‐effective protection for mobile homes in the most tornado‐prone states but not for permanent homes.

Suggested Citation

  • Kevin M. Simmons & Daniel Sutter, 2006. "Direct Estimation of the Cost Effectiveness of Tornado Shelters," Risk Analysis, John Wiley & Sons, vol. 26(4), pages 945-954, August.
    • Handle: RePEc:wly:riskan:v:26:y:2006:i:4:p:945-954
    DOI: 10.1111/j.1539-6924.2006.00790.x
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    References listed on IDEAS

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    1. Viscusi, W Kip, 1993. "The Value of Risks to Life and Health," Journal of Economic Literature, American Economic Association, vol. 31(4), pages 1912-1946, December.
    2. W. Kip Viscusi, 1994. "Mortality Effects of Regulatory Costs and Policy Evaluation Criteria," RAND Journal of Economics, The RAND Corporation, vol. 25(1), pages 94-109, Spring.
    3. Peltzman, Sam, 1975. "The Effects of Automobile Safety Regulation," Journal of Political Economy, University of Chicago Press, vol. 83(4), pages 677-725, August.
    4. David Merrell & Kevin M. Simmons & Daniel Sutter, 2005. "The Determinants of Tornado Casualties and the Benefits of Tornado Shelters," Land Economics, University of Wisconsin Press, vol. 81(1).
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    Cited by:

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