Economic Lessons of the Kobe Earthquake

PurposeThe purpose of this paper is to find the meaningful relationship between the economic impact of the natural disaster and economic condition.Design/methodology/approachThe paper employed cross‐sectional analysis to investigate the relationship between economic condition namely, gross domestic product per capita (GDPpc); gross domestic product per capita squared (GDPpc2); government consumption ratio to GDP (gc); ratio of M2 over GDP(M2); years of schooling attainment (sc); land area and finally; population and the economic impact of natural disasters, whereby ten types of natural disasters were chosen. The degree to which the human and economic losses due to these ten natural disasters were measured by, the variables selected are, number of killed; total affected; and ratio of total damage to GDP. Three different points of time were regressed, namely, 1985, 1995, and 2005 covering 73 countries.FindingsResults clearly indicate that there seems to be meaningful relationship between the economic impact of natural disasters and economic conditions.Practical implicationsThe paper provides some evidence on the important role of economic condition in minimizing the impact of natural disasters.Originality/valueThe paper incorporates a comprehensive list of explanatory variables in accounting for natural disaster fatalities.

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

Analysis of Economic Resiliency of Communities Affected by Natural Disasters: The Bay Area Case Study

Pacific island countries are highly vulnerable to various natural disasters which are destructive, unpredictable and occur frequently. The frequency and scale of these shocks heightens the importance of medium-term economic and fiscal planning to minimize the adverse impact of disasters on economic development. This paper identifies the intensity of natural disasters for each country in the Pacific based on the distribution of damage and population affected by disasters, and estimates the impact of disasters on economic growth and international trade using a panel regression. The results show that “severe” disasters have a significant and negative impact on economic growth and lead to a deterioration of the fiscal and trade balance. We also find that the negative impact on growth is stronger for more intense disasters. Going further this paper proposes a simple and consistent method to adjust IMF staff’s economic projections and debt sustainability analysis for disaster shocks for the Pacific islands. Better incorporating the economic impact of natural disasters in the medium- and long-term economic planning would help policy makers improve fiscal policy decisions and to be better adapted and prepared for natural disasters.

Pacific island countries are highly vulnerable to various natural disasters which are destructive, unpredictable and occur frequently. The frequency and scale of these shocks heightens the importance of medium-term economic and fiscal planning to minimize the adverse impact of disasters on economic development. This paper identifies the intensity of natural disasters for each country in the Pacific based on the distribution of damage and population affected by disasters, and estimates the impact of disasters on economic growth and international trade using a panel regression. The results show that 'severe' disasters have a significant and negative impact on economic growth and lead to a deterioration of the fiscal and trade balance. We also find that the negative impact on growth is stronger for more intense disasters. Going further this paper proposes a simple and consistent method to adjust IMF staff's economic projections and debt sustainability analysis for disaster shocks for the Pacific islands. Better incorporating the economic impact of natural disasters in the medium- and long-term economic planning would help policy makers improve fiscal policy decisions and to be better adapted and prepared for natural disasters.

Pacific island countries are highly vulnerable to various natural disasters which are destructive, unpredictable and occur frequently. The frequency and scale of these shocks heightens the importance of medium-term economic and fiscal planning to minimize the adverse impact of disasters on economic development. This paper identifies the intensity of natural disasters for each country in the Pacific based on the distribution of damage and population affected by disasters, and estimates the impact of disasters on economic growth and international trade using a panel regression. The results show that “severe” disasters have a significant and negative impact on economic growth and lead to a deterioration of the fiscal and trade balance. We also find that the negative impact on growth is stronger for more intense disasters. Going further this paper proposes a simple and consistent method to adjust IMF staff’s economic projections and debt sustainability analysis for disaster shocks for the Pacific islands. Better incorporating the economic impact of natural disasters in the medium- and long-term economic planning would help policy makers improve fiscal policy decisions and to be better adapted and prepared for natural disasters.

In 2020, China announced the successful completion of its poverty alleviation mission, noting that the focus of China’s poverty alleviation mission has shifted from eliminating absolute poverty to alleviating relative poverty. Due to global warming and frequent natural disasters, natural disaster shocks have seriously affected farmers’ livelihoods and aggravated relative poverty. Based on 5,804 rural household samples from the China Family Panel Studies, the impact of natural disasters on farmers’ relative poverty was investigated using the logit model. In addition, the interaction terms between the impact and intensity of natural disasters, non-agricultural employment and productive investment were included in the model. The results show that: 1) Natural disaster shocks and natural disaster intensities had a significant positive impact on farmers’ relative poverty. 2) Migrating for work and stable employment effectively alleviated the positive impact of natural disaster shocks and natural disaster intensities on farmers’ relative poverty, respectively. 3) Productive investment weakened the positive impact of natural disaster shocks on farmers’ relative poverty. 4) Scale management effectively alleviated the positive impact of natural disaster shocks on farmers’ relative poverty, but the moderating effect of scale management was not significant in areas with high disaster intensities.

The study investigates the impact of severe natural disasters on agriculture growth and GDP growth in both developed and developing countries using panel data from 1970 to 2019 with data from the EM-DAT database and the IMF World Economic Outlook database. The results of this study indicate that natural disasters have a detrimental impact on GDP growth and agricultural growth in both developed and developing countries. However, the impact is found to be greater in developing countries, despite having lower total damage costs as a percentage of GDP. The findings suggest that developing countries are more vulnerable to the economic impact of severe natural disasters compared to developed countries and can benefit from disaster risk financing tools. The current research highlights the urgency for governments to prioritize disaster preparedness and risk reduction measures, particularly in developing countries. Findings suggest that a higher proportion of educated individuals in a country can mitigate the impact of natural disasters. Additionally, the impact of population density on the cost of post-disaster reconstruction must also be considered by policymakers when allocating resources for disaster preparedness and recovery.

Poverty caused by disasters poses a great challenge to consolidate the achievements of poverty alleviation. Livelihood resilience is the key factor for farmers to resist risks and get rid of poverty. Therefore, this study used the China Family Panel Studies (CFPS) database. Firstly, we examined the impact of natural disasters on the poverty vulnerability of farmers. Secondly, taking livelihood resilience and its decomposition dimensions as threshold variables, we examined the mechanism of livelihood resilience between natural disasters and poverty. The results show that natural disaster shocks, natural disaster intensity, and natural disaster frequency all had a significant positive effect on farm households’ vulnerability to poverty. The threshold test shows that natural disasters had larger effects on the poverty vulnerability of the farmers with lower buffer capacity, self-organizing capacity, and learning capacity. When the livelihood resilience value exceeded the third threshold, the impact of natural disasters on the poverty vulnerability of farmers turned from positive to negative. When the buffer capacity exceeded the third threshold, the impact of natural disasters on poverty vulnerability turned from positive to negative; when the self-organizing capacity exceeded the first threshold, the impact of natural disasters on poverty vulnerability turned from positive to negative; when the learning capacity exceeded the third threshold, the impact of natural disasters on poverty vulnerability turned from positive to negative. Therefore, it is suggested that appropriate policies should be needed to support farmers’ livelihood resilience and address disaster-induced poverty by improving farmers’ buffer capacity, self-organizing capacity, and learning capacity. Focusing on farmers’ livelihood resilience, government should establish a policy support system aimed at improving farmers’ buffer capacity, self-organizing capacity, and learning capacity, that will help farmers to escape from disaster-induced poverty.

This study evaluates the economic impact of severe natural disasters in Africa using the generalised synthetic control method. In other words, it assesses how gross domestic product (GDP) would have been affected, had severe natural disasters not occurred. Moreover, it explores the determinants of the destructiveness of the impact of natural disasters, focusing on the role played by capital. We find that severe natural disasters induce a significant and continuous reduction of GDP many years after the event. Indeed, economic losses caused by disasters depend on the level of capital (human capital, employment and capital stock) and aspects of governance quality (political stability and absence of violence). In other words, negative synergies are apparent because while capital stock, employment and human capital unconditionally reduce the macroeconomic impact of natural disasters, the corresponding conditional or interactive effects with political stability are also negative. Policy implications are discussed.

This paper estimates the impact of catastrophic natural disasters on economic growth using an event study methodology on a country panel dataset from 1970 to 2019. The severity of the events is determined by the associated mortality. We find that affected economies which, given the way natural disasters are ranked, comprise mainly developing countries, suffer an average loss between 2.1 and 3.7 percentage points (p.p.). The estimated loss is not offset by above-average growth rates in the disasters aftermath. In contrast, when the severity of the events is determined by physical intensity rather than by mortality, which implies a more balanced estimating sample of developed and developing economies, the estimated effects on growth are negligible. Thus, the negative impacts of natural disasters on economic growth are larger for poorer countries, suggesting that the impact of natural disasters on growth is an economic development issue.

Presents six national case studies: Bangladesh, Vietnam, India, Nicaragua, Japan, and the Netherlands Since the turn of the millennium, more than one million people have been killed and 2.3 billion others have been directly affected by natural disasters around the world. In cases like the 2010 Haiti earthquake or the 2004 Indian Ocean tsunami, these disasters have time and time again wrecked large populations and national infrastructures. While recognizing that improved rescue, evacuation, and disease control are crucial to reducing the effects of natural disasters, in the final analysis, poverty remains the main risk factor determining the long-term impact of natural hazards. Furthermore, natural disasters have themselves a tremendous impact on the poorest of the poor, who are often ill-prepared to deal with natural hazards and for whom a hurricane, an earthquake, or a drought can mean a permanent submersion in poverty. The Economic Impacts of Natural Disasters focuses on these concerns for poverty and vulnerability. Written by a collection of esteemed scholars in disaster management and sustainable development, the report provides an overview of the general trends in natural disasters and their effects by focusing on a critical analysis of different methodologies used to assess the economic impact of natural disasters. Economic Impacts presents six national case studies (Bangladesh, Vietnam, India, Nicaragua, Japan and the Netherlands) and shows how household surveys and country-level macroeconomic data can analyze and quantify the economic impact of disasters. The researchers within Economic Impacts have created path-breaking work and have opened new avenues for thinking and debate to push forward the frontiers of knowledge on economics of natural disasters. A great report and an important addition to the literature about the economics of disasters and the cost-effectiveness of prevention, mitigation and adaption, including a good number of interesting and relevant applications from developed and devloping countries.—Javier E. Baez, Independent Evaluation Group, The World Bank Readership: Undergraduate/graduate students and scholars of the economics of natural disasters, disaster management, sustainable development, environmental economics, environmental risk management, and environmental policy.

As natural disasters become more complex, larger in scale, and unpredictable, the urgency and importance of developing strategic national and local spatial planning has grown to cope with climate change and natural disasters. While there is a growing interest in disaster adaptation and mitigation in Korea, population migration caused by natural disasters has not drawn much attention in field of disaster prevention. Against this backdrop, this study attempts to test if the occurrence of natural disasters has caused populations to migrate using a panel analysis and also if natural disasters' impacts are heterogeneous across cities given their different characteristics. A net change in population is used as a dependent variable, while data on human and property loss due to natural disasters are used as independent variables with other control variables. Results from the analysis confirm that the impact of natural disasters on population outflow is statistically significant. In particular, an increase in human loss increases population outflow, and its impact is greater in declining cities. The results provide empirical grounds for the necessity of spatial planning when considering natural disasters. Keywords: Natural Disaster, Population Migration, Flood, Impact of Disaster

Natural disasters cause serious economic and human losses. Yet there remains ambiguity in the existing literature with regard to their impact on the economy at large. This study re-examines the relationship between natural disasters and economic growth. It aims to contribute to a fairly limited literature on the economy-wide and sector-specific consequences of natural disasters in the short-to-medium term (up to 5 years). Further, it examines whether the disaster impacts are dependent on a country’s level of development. Based on panel data consisting of 102 (29 developed and 73 developing) countries over the period 1981–2015, it looks at the growth effects of four types of natural disasters, namely, floods, droughts, storms and earthquakes that were explored using the system generalised method of moments (GMM) approach. The results indicate that natural disasters have diverse economic impacts across economic sectors depending on disaster types and their intensity. The study confirms the findings of previous studies that the economic impacts of natural disasters are statistically stronger in developing countries. These findings may stimulate the policymakers especially in developing countries to explore the efficacy of viable ex-ante disaster risk financing tools (such as insurance, micro-insurance and catastrophic bonds). This would not only safeguard population and physical assets but also ensure adherence to the sustainable development goals. JEL Classification: Q54, O10

Abstract. Globalization and technological revolutions are making the world more interconnected. International trade is an important approach linking the world. Since the 2011 Tohoku earthquake and tsunami in Japan shocked the global supply chain, more attention has been paid to the global impact of large-scale disasters. China is the second largest trader in the world and faces frequent natural disasters. Therefore, this study proposes a gravity model for China's bilateral trade tailored to national circumstances and estimates the impact of natural disasters in China and trading partner countries on Chinese imports and exports. We analyzed Chinese and trading partner statistical data from 1980 to 2012. Study results show the following: (1) China's natural disasters have a positive impact on exports but have no significant impact on imports; (2) trading partner countries' natural disasters reduce Chinese imports and exports; (3) both development level and land area of the partners are important in determining the intensity of natural disaster impacts on China's bilateral trade. The above findings suggest that the impact of natural disasters on trade is asymmetric and significantly affected by other factors, which demand further study.