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The Unlikeliness of an Economic Catastrophe: Localization & Globalization

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.

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File URL: http://www.econ.qmul.ac.uk/papers/doc/wp576.pdf
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Paper provided by Queen Mary University of London, School of Economics and Finance in its series Working Papers with number 576.

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Date of creation: Oct 2006
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Handle: RePEc:qmw:qmwecw:wp576
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Web page: http://www.econ.qmul.ac.uk

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  1. 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.
  2. Jose Miguel Albala-Bertrand & Emmanouel C. Mamatzakis, 2001. "The Impact of Public Infrastructure on the Productivity of the Chilean Economy," Working Papers 435, Queen Mary University of London, School of Economics and Finance.
  3. 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.
  4. Taylor, Lance, 1994. "Gap models," Journal of Development Economics, Elsevier, vol. 45(1), pages 17-34, October.
  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. Kunreuther, Howard, 1996. "Mitigating Disaster Losses through Insurance," Journal of Risk and Uncertainty, Springer, vol. 12(2-3), pages 171-87, May.
  7. Howard Kunreuther, 1997. "Rethinking Society's Management of Catastrophic Risks*," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan, vol. 22(2), pages 151-176, April.
  8. 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.
  9. Charlotte Benson & Edward J. Clay, 2004. "Understanding the Economic and Financial Impacts of Natural Disasters," World Bank Publications, The World Bank, number 15025.
  10. 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.
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