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Normalizing economic loss from natural disasters: a global analysis

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  • Eric Neumayer
  • Fabian Barthel

Abstract

Climate change is likely to lead to an increase in the frequency and/or intensity of certain types of natural hazards, if not globally, then at least in certain regions. All other things equal, this should lead to an increase in the economic toll from natural disasters over time. Yet, all other things are not equal since affected areas become wealthier over time and rational individuals and governments undertake defensive mitigation measures, which requires normalizing economic losses if one wishes to analyze trends in economic loss from natural disasters for detecting a potential climate change signal. In this article, we argue that the conventional methodology for normalizing economic loss is problematic since it normalizes for changes in wealth over time, but fails to normalize for differences in wealth across space at any given point of time. We introduce an alternative methodology that overcomes this problem in theory, but faces many more problems in its empirical application. Applying, therefore, both methods to the most comprehensive existing global dataset of natural disaster loss, in general we find no significant upward trends in normalized disaster damage over the period 1980 to 2009 globally, regionally, for specific disasters or for specific disasters in specific regions. Due to our inability to control for defensive mitigation measures, one cannot infer from our analysis that there have definitely not been more frequent and/or more intensive weather-related natural hazards over the study period already. Moreover, it may still be far too early to detect a trend if humaninduced climate change has only just started and will gain momentum over time.

Suggested Citation

  • Eric Neumayer & Fabian Barthel, 2010. "Normalizing economic loss from natural disasters: a global analysis," GRI Working Papers 31, Grantham Research Institute on Climate Change and the Environment.
  • Handle: RePEc:lsg:lsgwps:wp31
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    References listed on IDEAS

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    1. Silvio Schmidt & Claudia Kemfert & Peter Höppe, 2008. "Tropical Cyclone Losses in the USA and the Impact of Climate Change: A Trend Analysis Based on a New Dataset," Discussion Papers of DIW Berlin 802, DIW Berlin, German Institute for Economic Research.
    2. William D. Nordhaus, 2006. "The Economics of Hurricanes in the United States," NBER Working Papers 12813, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Matthias Bruckner, 2012. "Climate change vulnerability and the identification of least developed countries," CDP Background Papers 015, United Nations, Department of Economics and Social Affairs.
    2. Liu, Jing, 2012. "Weather or Wealth: An Analysis of Property Loss Caused by Flooding in the U.S," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124992, Agricultural and Applied Economics Association.
    3. Elliott, Robert J.R. & Strobl, Eric & Sun, Puyang, 2015. "The local impact of typhoons on economic activity in China: A view from outer space," Journal of Urban Economics, Elsevier, vol. 88(C), pages 50-66.
    4. Ranger, Nicola & Niehörster, Falk, 2011. "Deep uncertainty in long-term hurricane risk: scenario generation and implications for future climate experiments," LSE Research Online Documents on Economics 37587, London School of Economics and Political Science, LSE Library.
    5. Muhammad Uzair Qamar & Muhammad Azmat & Muhammad Adnan Shahid & Daniele Ganora & Shakil Ahmad & Muhammad Jehanzeb Masud Cheema & Muhammad Abrar Faiz & Abid Sarwar & Muhammad Shafeeque & Muhammad Imran, 2017. "Rainfall Extremes: a Novel Modeling Approach for Regionalization," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 31(6), pages 1975-1994, April.
    6. Nicola Ranger & Falk Nieh�rster, 2011. "Deep uncertainty in long-term hurricane risk: scenario generation and implications for future climate experiments," GRI Working Papers 51, Grantham Research Institute on Climate Change and the Environment.
    7. Melanie Gall & Kevin A. Borden & Christopher T. Emrich & Susan L. Cutter, 2011. "The Unsustainable Trend of Natural Hazard Losses in the United States," Sustainability, MDPI, Open Access Journal, vol. 3(11), pages 1-25, November.
    8. Fabian Barthel & Eric Neumayer, 2012. "A trend analysis of normalized insured damage from natural disasters," Climatic Change, Springer, vol. 113(2), pages 215-237, July.
    9. Wolfgang Kron, 2013. "Coasts: the high-risk areas of the world," 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. 66(3), pages 1363-1382, April.
    10. Brecht, Henrike & Deichmann, Uwe & Wang, Hyoung Gun, 2013. "A global urban risk index," Policy Research Working Paper Series 6506, The World Bank.
    11. Seth Westra & Christopher J. White & Anthony S. Kiem, 2016. "Introduction to the special issue: historical and projected climatic changes to Australian natural hazards," Climatic Change, Springer, vol. 139(1), pages 1-19, November.
    12. Christopher Burgess & Michael Taylor & Tannecia Stephenson & Arpita Mandal & Leiska Powell, 2015. "A macro-scale flood risk model for Jamaica with impact of climate variability," 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. 78(1), pages 231-256, August.
    13. 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.
    14. H. Moel & B. Jongman & H. Kreibich & B. Merz & E. Penning-Rowsell & P. Ward, 2015. "Flood risk assessments at different spatial scales," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 20(6), pages 865-890, August.
    15. Hans Visser & Arthur Petersen & Willem Ligtvoet, 2014. "On the relation between weather-related disaster impacts, vulnerability and climate change," Climatic Change, Springer, vol. 125(3), pages 461-477, August.
    16. Undp, 2011. "HDR 2011 - Sustainability and Equity: A Better Future for All," Human Development Report (1990 to present), Human Development Report Office (HDRO), United Nations Development Programme (UNDP), number hdr2011, December.
    17. Trevor Maynard & Nicola Ranger, 2011. "What role for �long-term� insurance in adaptation? An analysis of the prospects for and pricing of multi-year insurance contracts," GRI Working Papers 62, Grantham Research Institute on Climate Change and the Environment.
    18. Ramón E. López & Vinod Thomas & Pablo Troncoso, 2015. "Climate Change and Natural Disasters," Working Papers wp414, University of Chile, Department of Economics.
    19. Hallegatte,Stephane & Bangalore,Mook & Jouanjean,Marie Agnes, 2016. "Higher losses and slower development in the absence of disaster risk management investments," Policy Research Working Paper Series 7632, The World Bank.
    20. Richard Tol, 2013. "The economic impact of climate change in the 20th and 21st centuries," Climatic Change, Springer, vol. 117(4), pages 795-808, April.
    21. Ilan Noy, 2016. "A Global Comprehensive Measure of the Impact of Natural Hazards and Disasters," Global Policy, London School of Economics and Political Science, vol. 7(1), pages 56-65, February.
    22. Saud Alshehri & Yacine Rezgui & Haijiang Li, 2015. "Delphi-based consensus study into a framework of community resilience to disaster," 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. 75(3), pages 2221-2245, February.

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    JEL classification:

    • N0 - Economic History - - General

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