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The Unlikeliness of an Economic Catastrophe: Localization & Globalization

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Abstract

This paper attempts to show why it is highly unlikely that a disaster can become a catastrophe. We first put forward an economic concept of disaster localization. This shows that a localized disaster is unlikely to affect the macro economy in any significant way and that economic development itself tends to make most disasters localized as an incidental consequence of its endogenous processes. We then show that the effect of current globalization on vulnerability seems to be double-edged. It may increase local vulnerability by disenfranchising communities and adding new sources of economic instability. But it may also speed up the downgrading of vulnerability at the national level by contributing to upgrade localization, further reducing the possibility of a catastrophe. It is therefore, difficult to imagine a realistic scenario in which a disaster could become catastrophic, even less so in developed countries.

Suggested Citation

  • Jose Miguel Albala-Bertrand, 2006. "The Unlikeliness of an Economic Catastrophe: Localization & Globalization," Working Papers 576, Queen Mary University of London, School of Economics and Finance.
  • Handle: RePEc:qmw:qmwecw:wp576
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    File URL: http://www.econ.qmul.ac.uk/media/econ/research/workingpapers/archive/wp576.pdf
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    1. JosÈ M. Albala-Bertrand & Emmanuel C. Mamatzakis, 2004. "The Impact of Public Infrastructure on the Productivity of the Chilean Economy," Review of Development Economics, Wiley Blackwell, vol. 8(2), pages 266-278, May.
    2. Kunreuther, Howard, 1996. "Mitigating Disaster Losses through Insurance," Journal of Risk and Uncertainty, Springer, vol. 12(2-3), pages 171-187, May.
    3. Albala-Bertrand, J. M., 1993. "Natural disaster situations and growth: A macroeconomic model for sudden disaster impacts," World Development, Elsevier, vol. 21(9), pages 1417-1434, September.
    4. J. M. Albala-Bertrand, 1999. "Industrial Interdependence Change in Chile: 1960-90 a comparison with Taiwan and South Korea," International Review of Applied Economics, Taylor & Francis Journals, vol. 13(2), pages 161-191.
    5. Rudra, Nita, 2002. "Globalization and the Decline of the Welfare State in Less-Developed Countries," International Organization, Cambridge University Press, vol. 56(02), pages 411-445, March.
    6. C. E. Weller, 2001. "Financial Crises After Financial Liberalisation: Exceptional Circumstances or Structural Weakness?," Journal of Development Studies, Taylor & Francis Journals, vol. 38(1), pages 98-127.
    7. Howard Kunreuther, 1997. "Rethinking Society's Management of Catastrophic Risks*," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 22(2), pages 151-176, April.
    8. Charlotte Benson & Edward J. Clay, 2004. "Understanding the Economic and Financial Impacts of Natural Disasters," World Bank Publications, The World Bank, number 15025, August.
    9. J. M. Albala-Bertrand, 2000. "Complex Emergencies versus Natural Disasters: An Analytical Comparison of Causes and Effects," Oxford Development Studies, Taylor & Francis Journals, vol. 28(2), pages 187-204.
    10. Taylor, Lance, 1994. "Gap models," Journal of Development Economics, Elsevier, vol. 45(1), pages 17-34, October.
    11. Guadagni, Alieto Aldo & Kaufmann, Jorge, 2004. "Comercio internacional y pobreza mundial," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), December.
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    Cited by:

    1. Hochrainer, Stefan, 2009. "Assessing the macroeconomic impacts of natural disasters : are there any ?," Policy Research Working Paper Series 4968, The World Bank.
    2. Mechler, Reinhard, 2009. "Disasters and economic welfare : can national savings help explain post-disaster changes in consumption ?," Policy Research Working Paper Series 4988, The World Bank.

    More about this item

    Keywords

    Catastrophe; Disaster escalation; Localization; Globalization; Vulnerability;

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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