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Natural disasters and economic policy for the Pacific Rim

  • Noy, Ilan
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I employ a typology of disaster impacts that distinguishes between direct and indirect damages. Direct damages are the damage to fixed assets and capital (including inventories), damages to raw materials and extractable natural resources, and of course mortality and morbidity that are a direct consequence of the natural phenomenon. Indirect damages refer to the economic activity, in particular the production of goods and services, that will not take place following the disaster and because of it. These indirect damages may be caused by the direct damages to physical infrastructure or harm to labor, or because reconstruction pulls resources away from the usual production practices. These indirect damages also include the additional costs that are incurred because of the need to use alternative and potentially inferior means of production and/or distribution for the provision of normal goods and services (Pelling et al., 2002).These costs can be accounted for in the aggregate by examining the overall performance of the economy, as measured through the most relevant macroeconomic variables, in particular GDP, the fiscal accounts, consumption, investment, and, especially important for the comparatively globalized countries of the Pacific Rim, the balance of trade and the balance of payments. These costs can also be further divided, following the standard distinction in macroeconomics, between the short run (up to several years) and the long run (typically considered to be at least five years, but sometimes also measured in decades). I use these distinctions in the discussion that follows.

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Paper provided by Victoria University of Wellington, School of Economics and Finance in its series Working Paper Series with number 2088.

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Date of creation: 2012
Date of revision:
Handle: RePEc:vuw:vuwecf:2088
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Alice Fong, Administrator, School of Economics and Finance, Victoria Business School, Victoria University of Wellington, PO Box 600 Wellington, New Zealand

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  1. Makena Coffmann & Ilan Noy, 2010. "A Hurricane Hits Hawaii: A Tale of Vulnerability to Natural Disasters," CESifo Forum, Ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 11(2), pages 67-72, 07.
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  22. Jacob Vigdor, 2008. "The Economic Aftermath of Hurricane Katrina," Journal of Economic Perspectives, American Economic Association, vol. 22(4), pages 135-54, Fall.
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