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Policy Trade-Offs in Building Resilience to Natural Disasters: The Case of St. Lucia

Author

Listed:
  • Alessandro Cantelmo
  • Leo Bonato
  • Giovanni Melina
  • Gonzalo Salinas

Abstract

Resilience to climate change and natural disasters hinges on two fundamental elements: financial protection —insurance and self-insurance— and structural protection —investment in adaptation. Using a dynamic general equilibrium model calibrated to the St. Lucia’s economy, this paper shows that both strategies considerably reduce the output loss from natural disasters and studies the conditions under which each of the two strategies provides the best protection. While structural protection normally delivers a larger payoff because of its direct dampening effect on the cost of disasters, financial protection is superior when liquidity constraints limit the ability of the government to rebuild public capital promptly. The estimated trade-off is very sensitive to the efficiency of public investment.

Suggested Citation

  • Alessandro Cantelmo & Leo Bonato & Giovanni Melina & Gonzalo Salinas, 2019. "Policy Trade-Offs in Building Resilience to Natural Disasters: The Case of St. Lucia," IMF Working Papers 19/54, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:19/54
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    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Policy Trade-Offs in Building Resilience to Natural Disasters: The Case of St. Lucia
      by Christian Zimmermann in NEP-DGE blog on 2019-04-17 03:54:00

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