Impacts of Natural Disasters on a Dynamic Economy

13 Pages Posted: 26 Oct 2012

See all articles by Andreas Groth

Andreas Groth

Ecole Normale Supérieure

Patrice Dumas

Centre De Coopération Internationale En Recherche Agronomique Pour Le Développement (CIRAD)

Michael Ghil

University of California; ENS, Paris

S. Hallegatte

World Bank

Date Written: October 25, 2012

Abstract

This paper presents a modeling framework for macroeconomic growth dynamics; it is motivated by recent attempts to formulate and study 'integrated models' of the coupling between natural and socio-economic phenomena. The challenge is to describe the interfaces between human activities and the functioning of the earth system. We examine the way that this interface works in the presence of endogenous business cycle dynamics, based on a non-equilibrium dynamic model. Recent findings about the macroeconomic response to natural disasters in such a nonequilibrium setting have shown a more severe response to natural disasters during expansions than during recessions. These findings raise questions about the assessment of climate change damages or natural disaster losses that are based purely on long-term growth models. In order to compare the theoretical findings with observational data, we analyze cyclic behavior in the U.S. economy, based on multivariate singular spectrum analysis. We analyze a total of nine aggregate indicators in a 52-year interval (1954–2005) and demonstrate that the behavior of the U.S. economy changes significantly between intervals of growth and recession, with higher volatility during expansions.

Keywords: business cycle, macroeconomic dynamics, multivariate singular spectrum analysis, nonequilibrium modeling, nonlinear fluctuation dissipation, vulnerability paradox

JEL Classification: C15, C60, E32

Suggested Citation

Groth, Andreas and Dumas, Patrice and Ghil, Michael and Hallegatte, Stephane, Impacts of Natural Disasters on a Dynamic Economy (October 25, 2012). Available at SSRN: https://ssrn.com/abstract=2166719 or http://dx.doi.org/10.2139/ssrn.2166719

Andreas Groth (Contact Author)

Ecole Normale Supérieure ( email )

24, rue Lhomond
Paris cedex 05, 75230
France

Patrice Dumas

Centre De Coopération Internationale En Recherche Agronomique Pour Le Développement (CIRAD)

42, rue Scheffer
Paris, 75116
France

Michael Ghil

University of California ( email )

Los Angeles, CA 90095
United States

ENS, Paris ( email )

Paris, 75005
France

Stephane Hallegatte

World Bank ( email )

1818 H Street NW
Washington, DC 20433
United States

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