The Economics of Natural Disasters

By StÃ©phane Hallegatte, V. Przyluski. 2010

295 citations recorded by the source corpus.

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.

Subfields: Global and Planetary Change, Sociology and Political Science, Soil Science

View Paper: https://www.semanticscholar.org/paper/c892458c2ddb49b060d88bb50678cf3362198783

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Citations in the corpus

Natural disasters' impact, factors of resilience and development: A meta-analysis of the macroeconomic literature (2014, unknown): “…and secondary costs (losses induced by disasters in terms of flows of goods, services and business revenues that will not be generated due to destruction or business interruptions and effects on the performance of the overall economy Hallegatte and Przyluski, 2010; Zapata-Marti, 1997: 10–11).”
Understanding trends and projections of disaster losses and climate change: is vulnerability the missing link? (2015, background): “For example, population exposure increases in concentrated areas may be higher for particular hazard types, which has been especially apparent for floods, storms and landslides (Kellenberg and Mobarak 2011; Bouwer 2011a).”
Economic Vulnerability and Resilience to Natural Hazards: A Survey of Concepts and Measurements (2018, background): “Any systematic assessment of welfare losses requires the conduct of economic assessment of the losses of economic flows [44].”
The political economy of natural disaster damage (2014, background): “Large-scale disasters cause significant collateral damage and macroeconomic distortions that impact the wider population (Lall and Deichmann, 2010; Hallegatte and Przyluski, 2010).”
Natural Disaster, Poverty, and Development: An Introduction (2017, background): “Many reports implicate climate change in the recent increase in hydro-meteorological natural disasters, such as cyclones, floods, and droughts (e.g., Cavallo & Noy, 2009; Kellenberg & Mobarak, 2011; Strömberg, 2007; World Bank, 2013).”
The impact of climate change on incomes and convergence in Africa (2020, background): “This long-term positive sensitivity of severely-extremely wet events potentially highlights the beneficial economic-only consequences of capital destruction and reconstruction as hypothesized in earlier publications (S. Hallegatte & Przyluski, 2010).”