Chapter 18 - Economic Impact Assessment After a Natural Disaster Using DEMATEL Method

Abstract

A disaster is the disruption of the normal functioning of a system or community, which causes a strong impact on people, structures, and environment. Disaster can be grouped as man-made and natural. An example of a man-made disaster is a terrorist attack and examples of natural disaster include earthquake, cyclone, wildfire, storm, and flood. There is an increase in natural disaster frequency and severity for the past decades but there is limited information on the direct and indirect impacts of natural disasters. While the information on economic impact due to natural disasters is better in advanced economies, disaster has a continuous challenge in the economic valuation of losses immediately after disasters because the economic impacts of natural disasters are diverse, quality, and values of similar items are different in different places and not all items have market values. These difficulties manifest in data paucity, which limits research and decision-making. In this study, we show how the Decision Making Trial and Evaluation Laboratory (DEMATEL) method could be adapted to identify and assess the economic impacts of natural disasters. The DEMATEL is a structural model, which combines knowledge from existing literature and expert opinions through matrix algebra. The DEMATEL process determines causal relationships and aggregate influence scores for key attributes that can be used to determine the impacts (positive or negative) of events of complex consequences such as a natural disaster. We compare and discuss the advantages of DEMATEL in assessing the economic impact of natural disasters and in policymaking.