The economics of natural disasters : concepts and methods
Large-scale disasters regularly affect societies over the globe, causing large destruction and damage. After each of these events, media, insurance companies, and international institu-tions publish numerous assessments of the"cost of the disaster."However these assessments are based on different methodologies and approaches, and they often reach different results. Besides methodological differences, these discrepancies are due to the multi-dimensionality in disaster impacts and their large redistributive effects, which make it unclear what is included in the estimates. But most importantly, the purpose of these assessments is rarely specified, although different purposes correspond to different perimeters of analysis and different definitions of what a cost is. To clarify this situation, this paper proposes a definition of the cost of a disaster, and emphasizes the most important mechanisms that explain and determine this cost. It does so by first explaining why the direct economic cost, that is, the value of what has been damaged or destroyed by the disaster, is not a sufficient indicator of disaster seriousness and why estimating indirect losses is crucial to assess the consequences on welfare. The paper describes the main indirect consequences of a disaster and the following reconstruction phase, and discusses the economic mechanisms at play. It proposes a review of available methodologies to assess indirect economic consequences, illustrated with examples from the literature. Finally, it highlights the need for a better understanding of the economics of natural disasters and suggests a few promising areas for research on this topic.
|Date of creation:||01 Dec 2010|
|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.:
- Stefan Dercon, 2003.
"Growth and Shocks: evidence from rural Ethiopia,"
Economics Series Working Papers
WPS/2003-12, University of Oxford, Department of Economics.
- Gaddis, Erica Brown & Miles, Brian & Morse, Stephanie & Lewis, Debby, 2007. "Full-cost accounting of coastal disasters in the United States: Implications for planning and preparedness," Ecological Economics, Elsevier, vol. 63(2-3), pages 307-318, August.
- Eduardo Cavallo & Ilan Noy, 2009.
"The Economics of Natural Disasters - A Survey,"
200919, University of Hawaii at Manoa, Department of Economics.
- Eduardo A. Cavallo & Ilan Noy, 2009. "The Economics of Natural Disasters: A Survey," IDB Publications (Working Papers) 6779, Inter-American Development Bank.
- Eduardo Cavallo & Ilan Noy, 2009. "The Economics of Natural Disasters: A Survey," Research Department Publications 4649, Inter-American Development Bank, Research Department.
- Stéphane Hallegatte & Nicola Ranger & Olivier Mestre & Patrice Dumas & Jan Corfee-Morlot & Celine Herweijer & Robert Wood, 2011.
"Assessing climate change impacts, sea level rise and storm surge risk in port cities: a case study on Copenhagen,"
Springer, vol. 104(1), pages 113-137, January.
- Stéphane Hallegatte & Nicola Patmore & Olivier Mestre & Patrice Dumas & Jan Corfee-Morlot & Celine Herweijer & Robert Muir-Wood, 2008. "Assessing Climate Change Impacts, Sea Level Rise and Storm Surge Risk in Port Cities: A Case Study on Copenhagen," OECD Environment Working Papers 3, OECD Publishing.
- Hallstrom, Daniel G. & Smith, V. Kerry, 2005. "Market responses to hurricanes," Journal of Environmental Economics and Management, Elsevier, vol. 50(3), pages 541-561, November.
When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:5507. 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.