Natural disasters and the dynamics of intangible assets
Empirical evidence suggests that the higher-order effects of natural disasters, which affect intangible assets, may be even more important than the material inter-industry effects. However, most existing general equilibrium models ignore higher order effects concerning human capital. Moreover, it is recognized that natural resource dependence increases vulnerability to natural disasters. Recent studies have indeed shown the potential importance of subsistence traps caused by asset losses in low-income economies from a partial equilibrium perspective. This paper presents an analysis that allows for endogenous investments in real assets (physical capital) as well as in human capital, explicitly considering the potential for subsistence traps arising from minimum consumption and minimum natural resource irreversibility thresholds. The general equilibrium ramifications of subsistence traps are developed. The main issue is that the economy may be subject to hysteresis: A temporary shock such as a natural disaster may leave permanent consequences for the economy. An obvious permanent effect of a one-time disaster shock is that physical man-made and natural assets owned especially by poor households may end up completely wiped out. The disaster may not be the direct cause; it may be that poor households would have to obtain minimum subsistence consumption out of depleted assets. However, not all permanent effects of a one-time shock are negative. Under certain conditions, the destruction of man-made physical and natural capital may have general equilibrium effects that increase the incentives to invest in human capital and may even propel a formerly stagnating economy into a virtuous path of continuing growth.
|Date of creation:||01 Mar 2009|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: (202) 477-1234
Web page: http://www.worldbank.org/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Jacobs, Bas, 2007.
"Real options and human capital investment,"
Elsevier, vol. 14(6), pages 913-925, December.
- Duryea, Suzanne & Arends-Kuenning, Mary, 2003. "School Attendance, Child Labor and Local Labor Market Fluctuations in Urban Brazil," World Development, Elsevier, vol. 31(7), pages 1165-1178, July.
- Skoufias, Emmanuel, 2003. "Economic Crises and Natural Disasters: Coping Strategies and Policy Implications," World Development, Elsevier, vol. 31(7), pages 1087-1102, July.
- Eric A. Hanushek & Ludger Woessmann, 2008.
"The Role of Cognitive Skills in Economic Development,"
Journal of Economic Literature,
American Economic Association, vol. 46(3), pages 607-68, September.
- Eric Hanushek & Ludger Woessmann, 2008. "The Role of Cognitive Skills in Economic Development," Discussion Papers 07-034, Stanford Institute for Economic Policy Research.
- Hanushek, Eric A. & Wößmann, Ludger, 2008. "The role of cognitive skills in economic development," Munich Reprints in Economics 20454, University of Munich, Department of Economics.
- Hallegatte, Stéphane & Dumas, Patrice, 2009. "Can natural disasters have positive consequences? Investigating the role of embodied technical change," Ecological Economics, Elsevier, vol. 68(3), pages 777-786, January.
- Crespo Cuaresma & Hlouskova & Obersteiner, 2008. "Natural Disasters As Creative Destruction? Evidence From Developing Countries," Economic Inquiry, Western Economic Association International, vol. 46(2), pages 214-226, 04.
- Angel de la Fuente & Rafael Doménech, 2006.
"Human Capital in Growth Regressions: How Much Difference Does Data Quality Make?,"
Journal of the European Economic Association,
MIT Press, vol. 4(1), pages 1-36, 03.
- Angel de la Fuente & Rafael Donénech, 2000. "Human Capital in Growth Regressions: How much Difference Does Data Quality Make?," OECD Economics Department Working Papers 262, OECD Publishing.
- ?gel de la Fuente & Rafael Dom?ech, . "Human Capital In Growth Regressions: How Much Difference Does Data Quality Make?," UFAE and IAE Working Papers 446.00, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
- de la Fuente, Angel & Doménech, Rafael, 2000. "Human Capital In Growth Regressions: How Much Difference Does Data Quality Make?," CEPR Discussion Papers 2466, C.E.P.R. Discussion Papers.
- Casey B. Mulligan & Xavier Sala-i-Martin, 1994.
"Measuring aggregate human capital,"
Economics Working Papers
112, Department of Economics and Business, Universitat Pompeu Fabra, revised Jan 1995.
- Casey B. Mulligan & Xavier Sala-i-Martin, 1995. "Measuring Aggregate Human Capital," NBER Working Papers 5016, National Bureau of Economic Research, Inc.
- Mulligan, Casey B & Sala-i-Martin, Xavier, 1995. "Measuring Aggregate Human Capital," CEPR Discussion Papers 1149, C.E.P.R. Discussion Papers.
- Sala-i-Martin, X. & Mulligan, C.B., 1995. "Measuring Aggregate Human Capital," Papers 723, Yale - Economic Growth Center.
- Horwich, George, 2000. "Economic Lessons of the Kobe Earthquake," Economic Development and Cultural Change, University of Chicago Press, vol. 48(3), pages 521-42, April.
- H. Scott Gordon, 1954. "The Economic Theory of a Common-Property Resource: The Fishery," Journal of Political Economy, University of Chicago Press, vol. 62, pages 124.
- Mark Skidmore & Hideki Toya, 2002. "Do Natural Disasters Promote Long-Run Growth?," Economic Inquiry, Western Economic Association International, vol. 40(4), pages 664-687, October.
- Psacharopoulos, George & Patrinos, Harry Anthony, 2002.
"Returns to investment in education : a further update,"
Policy Research Working Paper Series
2881, The World Bank.
- George Psacharopoulos & Harry Anthony Patrinos, 2004. "Returns to investment in education: a further update," Education Economics, Taylor & Francis Journals, vol. 12(2), pages 111-134.
- Lopez, Ramon E. & Islam, Asif M., 2008. "When Government Spending Serves the Elites: Consequences for Economic Growth in a Context of Market Imperfections," Working Papers 45875, University of Maryland, Department of Agricultural and Resource Economics.
- John C. Bluedorn, 2005.
"Hurricanes: Intertemporal Trade and Capital Shocks,"
Economics Series Working Papers
241, University of Oxford, Department of Economics.
- John C. Bluedorn, 2005. "Hurricanes: Intertemporal Trade and Capital Shocks," Economics Papers 2005-W22, Economics Group, Nuffield College, University of Oxford.
- Tobias N. Rasmussen, 2004. "Macroeconomic Implications of Natural Disasters in the Caribbean," IMF Working Papers 04/224, International Monetary Fund.
- Charles Grant, 2007. "Estimating credit constraints among US households," Oxford Economic Papers, Oxford University Press, vol. 59(4), pages 583-605, October.
- Prachi Mishra, 2006. "Emigration and Brain Drain: Evidence From the Caribbean," IMF Working Papers 06/25, International Monetary Fund.
- Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
- López, Ramón & Miller, Sebastian J., 2008. "Chile: The Unbearable Burden of Inequality," World Development, Elsevier, vol. 36(12), pages 2679-2695, December.
When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:4874. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Roula I. Yazigi)
If references are entirely missing, you can add them using this form.