Debt Sustainability under Catastrophic Risk: The Case for Government Budget Insurance

By Eduardo A. Cavallo, E. Borensztein, Patricio Valenzuela. 2007

558 citations recorded by the source corpus.

Natural disasters are an important source of vulnerability in the Caribbean region. Despite being one of the more disaster-prone areas of the world, it has the lowest levels of insurance coverage. This paper examines the vulnerability of Belizes public finance to the occurrence of hurricanes and the potential impact of insurance instruments in reducing that vulnerability. The paper finds that catastrophic risk insurance significantly improves Belizes debt sustainability. In addition, the methodology employed makes it possible to estimate the appropriate level of insurance, which for the case of Belize is a maximum coverage of US$120 million per year. International organizations can play a role in assisting countries to overcome distortions in insurance markets, as well as in helping to relax internal political resistance to the purchase of insurance policies.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/ad57d1876aeee6a53081aaf9cdb0d5b8af776a23

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

In Economics and Econometrics

In Finance

Citations in the corpus

Foreign Direct Investment and R&D: Substitutes or Complements—A Case of Indian Manufacturing after 1991 Reforms (2011, background): “be an important catalyst in fostering their spectacular growth (Nelson and Pack 1999).”
Tourism and regional income inequality: Evidence from China (2016, background): “Various studies (e.g. Nelson & Pack, 1999; Pender, 2003) show that the resource shift or structural change from traditional sectors to specific dynamic sectors with faster productivity growth and more productive technologies has been an extra source of aggregate productivity growth in addition to…”
Industrial Policy Changes and Firm-Level Technological Capability Development: Evidence from Northern Brazil (2008, background): “Differently, the ‘assimilation’ perspective recognizes the importance of such investments, but sees learning, capability building, and innovation as central factors in explaining industrial growth ( Nelson & Pack, 1999 ).”
Innovation and Economic Development (2009, background): “…by now an ample literature demonstrating that the catch-up of not only Japan (Johnson 1982) but also other so-called “newly industrializing countries” in Asia (Amsden 1989, Wade 1990, Hobday 1995, Kim 1997, Nelson and Pack 1999, Kim and Nelson 2000) was associated with conscious capability uilding.”
Innovation Capabilities and Directions of Development (2009, background): “As emphasised by Nelson and Pack (1999), productivity measures would reflect both kinds of accumulation.”
Entrepreneurship and Economic Development: Theory, Evidence and Policy (2013, background): “In Nelson and Pack (1999) a ‘rapid’ expansion of skilled labour can only be absorbed if entrepreneurial ability is high, and that without entrepreneurial ability the returns to physical and human capital is low.”
Economic Development from the Perspective of Evolutionary Economic Theory (2008, background): “In a recent article, Howard Pack and I (Nelson & Pack, 1999) argued that neoclassical theory sees economic development as largely driven by accumulation—investments in physical and human capital.”
Hurricane Iniki: measuring the long-term economic impact of a natural disaster using synthetic control (2011, background): “On the other side of the fiscal ledger, the impact of disasters on tax and other revenue sources has also seldom been quantitatively examined (for recent comparative research, see Borensztein et al., 2009; Noy and Nualsri, 2011).”