Economic development and losses due to natural disasters: The role of hazard exposure |
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| Affiliation: | 1. Banque centrale du Luxembourg, 2 boulevard Royal, L-2983, Luxembourg;2. Ecole Polytechnique Paris, Rue de Saclay 91128 Palaiseau Cedex, France;1. School of Resources, Environment and Architectural Engineering, Laboratory of National Land Space Planning and Disaster Emergency Management of Inner Mongolia, Chifeng University, Inner Mongolia, China;2. State Key Laboratory of Earth Surface Processes and Resource Ecology, Faculty of Geographical Science, Beijing Normal University, Beijing, China;3. College of Geographical Science, Inner Mongolia Key Laboratory of Disaster and Ecological Security on the Mongolian Plateau, Inner Mongolia Normal University, Inner Mongolia, China;1. University of Birmingham, UK;2. Ecole Polytechnique & IPAG, France;3. Nankai University, China;1. Department of Economics, University of Sussex, United Kingdom;2. Central Bank of Sri Lanka, Colombo, Sri Lanka;3. Institute for Environmental Studies, Vrije Universiteit, Amsterdam, Netherlands;4. Department of Spatial Economics, Vrije Universiteit, Amsterdam, Netherlands;5. Tinbergen Institute, Amsterdam, Netherlands;6. CESifo, Munich, Germany |
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| Abstract: | Our contribution is to show that the relationship between wealth and disasters is mainly formed by the exposure to disaster hazard. We first build a simple analytical model that demonstrates how countries that face a low hazard of disasters are likely to see first increasing losses and then decreasing ones with increasing economic development. At the same time, countries that face a high hazard of disasters are likely to experience first decreasing losses and then increasing ones with increasing economic development. We then use a cross-country panel dataset in conjunction with a hazard exposure index to investigate whether the data is consistent with the predictions from the model. In line with our model, we find that the relationship of losses with wealth crucially depends on the level of hazard of natural disasters faced by countries. |
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