Dealing with Increased Risk of Natural Disasters: Challenges and Options

38 Pages Posted: 6 Feb 2006

See all articles by Michael Keen

Michael Keen

International Monetary Fund (IMF) - Fiscal Affairs Department; CESifo (Center for Economic Studies and Ifo Institute); Institute for Fiscal Studies (IFS)

Muthukumara Mani

World Bank

Paul K. Freeman

Dimensional Fund Advisors Inc.

Date Written: October 2003

Abstract

Natural disaster risk is emerging as an increasingly important constraint on economic development and poverty reduction. This paper first sets out the key stylized facts in the area - that the costs of disaster have been increasing, seem set to continue to increase, and bear especially heavily on the poorest. It then reviews the key economic issues at stake, focusing in particular on the actual and prospective roles of, and interaction between, market instruments and public interventions in dealing with disaster risk. Key sources of market failure include the difficulty of risk spreading and, perhaps even more fundamental, the Samaritan's dilemma: the underinvestment in protective measures associated with the rational expectation that others will provide support if disaster occurs. Innovations addressing each of these are discussed.

Keywords: Natural Disasters, Developing Countries, Climate Change, Urbanization

JEL Classification: H30, H41, O10, G22

Suggested Citation

Keen, Michael and Mani, Muthukumara and Freeman, Paul K., Dealing with Increased Risk of Natural Disasters: Challenges and Options (October 2003). IMF Working Paper, Vol. , pp. 1-38, 2003. Available at SSRN: https://ssrn.com/abstract=880324

Michael Keen

International Monetary Fund (IMF) - Fiscal Affairs Department ( email )

700 19th Street, NW
Washington, DC 20431
United States

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

Institute for Fiscal Studies (IFS)

7 Ridgmount Street
London, WC1E 7AE
United Kingdom

Muthukumara Mani

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Paul K. Freeman

Dimensional Fund Advisors Inc.

1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
United States

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