The Economic Impact of Tropical Cyclones: Case Studies in General Equilibrium

Jere Lehtomaa () and Clément Renoir ()
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Jere Lehtomaa: Center of Economic Research, ETH Zurich, Zurichbergstrasse 18, 8092 Zurich, Switzerland
Clément Renoir: Center of Economic Research, ETH Zurich, Zurichbergstrasse 18, 8092 Zurich, Switzerland

No 23/382, CER-ETH Economics working paper series from CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich

Abstract: We present a new framework for estimating the long-run economic impacts of natural disasters. Our approach combines a disaster impact model with a general equilibrium model of the economy. We apply the methodology to study the effects of tropical cyclones in the United States, the Caribbean islands, Japan, China, and the Philippines. Our results show that the post-disaster recovery after a single shock can take several decades, with notable cumulative negative effects for frequently affected regions. For instance, cyclone activity reduces long-run aggregate consumption between 0.3 - 22 %, depending on the region. To evaluate the robustness of our results, we extend the model with two additional scenarios. First, we consider endogenous economic productivity gains from specialization. Second, we add a scenario where climate change alters the intensity and frequency of future disasters. The extensions slightly modify the numerical results but do not change the qualitative conclusions.

Keywords: Tropical Cyclones; Climate Change; Growth; General Equilibrium (search for similar items in EconPapers)
JEL-codes: C63 O11 Q54 (search for similar items in EconPapers)
Pages: 55 pages
Date: 2023-04
New Economics Papers: this item is included in nep-env, nep-gro, nep-mac, nep-res and nep-sea
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