Investigating Power Laws in Hurricane Damages

25 Pages Posted: 22 Dec 2012

See all articles by Calvin Blackwell

Calvin Blackwell

College of Charleston - School of Business

Date Written: December 20, 2012

Abstract

Recent research indicates that the energy generated by hurricanes follows a power law distribution. We hypothesize that economic damages caused by hurricanes also follow a power law distribution. Using yearly hurricane damage data from 1900-2005 we show that the distribution of yearly damages due to hurricanes in the US may follow either a power law or lognormal distribution. Furthermore, if the distribution of damages follows a power law, then for the best-fit distribution, the tail of the distribution is so ‘fat’ that the variance of damages, conditional on being in the tail, is potentially unbounded.

Keywords: hurricane, power law, Pareto distribution, natural hazard

JEL Classification: Q54

Suggested Citation

Blackwell, Calvin, Investigating Power Laws in Hurricane Damages (December 20, 2012). Available at SSRN: https://ssrn.com/abstract=2192074 or http://dx.doi.org/10.2139/ssrn.2192074

Calvin Blackwell (Contact Author)

College of Charleston - School of Business ( email )

Department of Economics
66 George Street
Charleston, SC 29424
United States
843-953-7836 (Phone)
843-953-5697 (Fax)

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