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Gone with the Wind; Estimating Hurricane and Climate Change Costs in the Caribbean

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  • Sebastian Acevedo Mejia

Abstract

This paper studies the economic costs of hurricanes in the Caribbean by constructing a novel dataset that combines a detailed record of tropical cyclones’ characteristics with reported damages. I estimate the relation between hurricane wind speeds and damages in the Caribbean; finding that the elasticity of damages to GDP ratio with respect to maximum wind speeds is three in the case of landfalls. The data show that hurricane damages are considerably underreported, particularly in the 1950s and 1960s, with average damages potentially being three times as large as the reported average of 1.6 percent of GDP per year. I document and show that hurricanes that do not make landfall also have considerable negative impacts on the Caribbean economies. Finally, I estimate that the average annual hurricane damages in the Caribbean will increase between 22 and 77 percent by the year 2100, in a global warming scenario of high CO2 concentrations and high global temperatures.

Suggested Citation

  • Sebastian Acevedo Mejia, 2016. "Gone with the Wind; Estimating Hurricane and Climate Change Costs in the Caribbean," IMF Working Papers 16/199, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:16/199
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    References listed on IDEAS

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    1. Mendelsohn, Robert & Emanuel, Kerry & Chonabayashi, Shun, 2011. "The impact of climate change on global tropical storm damages," Policy Research Working Paper Series 5562, The World Bank.
    2. Hallegatte, Stephane & Hourcade, Jean-Charles & Dumas, Patrice, 2007. "Why economic dynamics matter in assessing climate change damages: Illustration on extreme events," Ecological Economics, Elsevier, vol. 62(2), pages 330-340, April.
    3. repec:wsi:ccexxx:v:03:y:2012:i:02:n:s201000781250011x is not listed on IDEAS
    4. Robert S. Pindyck, 2013. "Climate Change Policy: What Do the Models Tell Us?," Journal of Economic Literature, American Economic Association, vol. 51(3), pages 860-872, September.
    5. repec:wsi:ccexxx:v:02:y:2011:i:01:n:s2010007811000188 is not listed on IDEAS
    6. Tol, Richard S. J. & Narita, Daiju & Anthoff, David, 2008. "Damage Costs of Climate Change through Intensification of Tropical Cyclone Activities: An Application of FUND," Papers WP259, Economic and Social Research Institute (ESRI).
    7. Strobl, Eric, 2012. "The economic growth impact of natural disasters in developing countries: Evidence from hurricane strikes in the Central American and Caribbean regions," Journal of Development Economics, Elsevier, vol. 97(1), pages 130-141.
    8. repec:wsi:ccexxx:v:01:y:2010:i:01:n:s2010007810000054 is not listed on IDEAS
    9. Nicholas Stern, 2013. "The Structure of Economic Modeling of the Potential Impacts of Climate Change: Grafting Gross Underestimation of Risk onto Already Narrow Science Models," Journal of Economic Literature, American Economic Association, vol. 51(3), pages 838-859, September.
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    Keywords

    Climatic changes; Caribbean; Pacific Island Countries; Greenhouse gas emissions; Climate policy; Parameter estimation; Econometric models; Hurricane; tropical cyclone; climate change; climate impact; Caribbean.;

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