Abstract

http://ssrn.com/abstract=1884827
 
 

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The Political Economy of Natural Disaster Damage


Eric Neumayer


London School of Economics and Political Science (LSE)

Thomas Plümper


University of Essex - Department of Government

Fabian Barthel


London School of Economics & Political Science (LSE)

March 2013

Global Environmental Change 24, 2014, 8-19

Abstract:     
Economic damage from natural hazards can sometimes be prevented and always mitigated. However, private individuals tend to underinvest in such measures due to problems of collective action, information asymmetry and myopic behavior. Governments, which can in principle correct these market failures, themselves face incentives to underinvest in costly disaster prevention policies and damage mitigation regulations. Yet, disaster damage varies greatly across countries. We argue that rational actors will invest more in trying to prevent and mitigate damage the larger a country’s propensity to experience frequent and strong natural hazards. Accordingly, economic loss from an actually occurring disaster will be smaller the larger a country’s disaster propensity – holding everything else equal, such as hazard magnitude, the country’s total wealth and per capita income. At the same time, damage is not entirely preventable and smaller losses tend to be random. Disaster propensity will therefore have a larger marginal effect on larger predicted damages than on smaller ones. We employ quantile regression analysis in a global sample to test these predictions, focusing on the three disaster types causing the vast majority of damage worldwide: earthquakes, floods and tropical cyclones.

Number of Pages in PDF File: 47

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Date posted: September 22, 2011 ; Last revised: March 2, 2014

Suggested Citation

Neumayer, Eric and Plümper, Thomas and Barthel, Fabian, The Political Economy of Natural Disaster Damage (March 2013). Global Environmental Change 24, 2014, 8-19. Available at SSRN: http://ssrn.com/abstract=1884827 or http://dx.doi.org/10.2139/ssrn.1884827

Contact Information

Eric Neumayer
London School of Economics and Political Science (LSE) ( email )
Houghton Street
WC2A 2AE London
United Kingdom
+44 207 955 7598 (Phone)
+44 207 955 7412 (Fax)
HOME PAGE: http://personal.lse.ac.uk/neumayer
Thomas Plümper (Contact Author)
University of Essex - Department of Government ( email )
Wivenhoe Park
Colchester, Essex CO4 3SQ
United Kingdom
HOME PAGE: http://www.polsci.org/pluemper
Fabian Barthel
London School of Economics & Political Science (LSE) ( email )
Houghton Street
London, WC2A 2AE
United Kingdom
HOME PAGE: http://personal.lse.ac.uk/barthel
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