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Economic resilience: definition and measurement

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  • Hallegatte, Stephane

Abstract

The welfare impact of a disaster does not only depend on the physical characteristics of the event or its direct impacts in terms of lost lives and assets. Welfare impacts also depend on the ability of the economy to cope, recover, and reconstruct and therefore to minimize aggregate consumption losses. This ability can be referred to as the macroeconomic resilience to natural disasters. Macroeconomic resilience has two components: instantaneous resilience, which is the ability to limit the magnitude of immediate production losses for a given amount of asset losses, and dynamic resilience, which is the ability to reconstruct and recover. Welfare impacts also depend on micro-economic resilience, which depends on the distribution of losses; on households'vulnerability, such as their pre-disaster income and ability to smooth shocks over time with savings, borrowing, and insurance, and on the social protection system, or the mechanisms for sharing risks across the population. The (economic) welfare disaster risk in a country can be reduced by reducing the exposure or vulnerability of people and assets (reducing asset losses), increasing macroeconomic resilience (reducing aggregate consumption losses for a given level of asset losses), or increasing microeconomic resilience (reducing welfare losses for a given level of aggregate consumption losses). The paper proposes rules of thumb to estimate macroeconomic and microeconomic resilience based on the relevant parameters in the economy. It also provides a toolbox of policies to increase macro- or micro-economic resilience and a list of indicators that can be used to build a resilience indicator.

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  • Hallegatte, Stephane, 2014. "Economic resilience: definition and measurement," Policy Research Working Paper Series 6852, The World Bank.
  • Handle: RePEc:wbk:wbrwps:6852
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    1. Veeshan Rayamajhee & Alok K. Bohara & Virgil Henry Storr, 2020. "Ex-Post Coping Responses and Post-Disaster Resilience: a Case from the 2015 Nepal Earthquake," Economics of Disasters and Climate Change, Springer, vol. 4(3), pages 575-599, October.
    2. César Andrés Mendoza & Giulio Breglia & Benjamín Jara, 2020. "Regional labor markets after an earthquake. Short-term emergency reactions in a cross-country perspective. Cases from Chile, Ecuador, Italy [Regionale Arbeitsmärkte nach einem Erdbeben. Kurzfristig," Review of Regional Research: Jahrbuch für Regionalwissenschaft, Springer;Gesellschaft für Regionalforschung (GfR), vol. 40(2), pages 189-221, October.
    3. Erika Quendler & Mangirdas Morkūnas, 2020. "The Economic Resilience of the Austrian Agriculture since the EU Accession," Journal of Risk and Financial Management, MDPI, Open Access Journal, vol. 13(10), pages 1-1, October.
    4. Yingqi Zhu & Ying Wang & Tianxue Liu & Qi Sui, 2018. "Assessing macroeconomic recovery after a natural hazard based on ARIMA—a case study of the 2008 Wenchuan earthquake in China," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 91(3), pages 1025-1038, April.
    5. Mohor, Guilherme Samprogna & Mendiondo, Eduardo Mario, 2017. "Economic indicators of hydrologic drought insurance under water demand and climate change scenarios in a Brazilian context," Ecological Economics, Elsevier, vol. 140(C), pages 66-78.
    6. Veeshan Rayamajhee & Alok K. Bohara & Virgil Henry Storr, 0. "Ex-Post Coping Responses and Post-Disaster Resilience: a Case from the 2015 Nepal Earthquake," Economics of Disasters and Climate Change, Springer, vol. 0, pages 1-25.
    7. Fanny Salignac & Axelle Marjolin & Rebecca Reeve & Kristy Muir, 2019. "Conceptualizing and Measuring Financial Resilience: A Multidimensional Framework," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 145(1), pages 17-38, August.
    8. Swenja Surminski, 2018. "Fit for Purpose and Fit for the Future? An Evaluation of the UK's New Flood Reinsurance Pool," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 21(1), pages 33-72, March.

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    Keywords

    Economic Theory&Research; Natural Disasters; Climate Change Economics; Insurance&Risk Mitigation; Labor Policies;

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