The Impact of Government Disaster Surveillance and Alerts on Local Economic and Financial Conditions

Thiago Silva (), Fabiano José Muniz () and Benjamin Tabak
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Fabiano José Muniz: Universidade Católica de Brasília

Environmental & Resource Economics, 2023, vol. 84, issue 2, No 8, 559-591

Abstract: Abstract This paper examines how government alerts about a potential dam rupture affect Brazilian municipalities’ local economic and financial conditions. The dam collapses in Mariana (2015) and Brumadinho (2019) revealed the extent of losses that environmental disasters can cause in terms of human lives, flora, and fauna. This paper investigates the effects of government alerts regarding dams’ structural vulnerability on nearby municipalities. We focus on municipalities with dams classified as structurally vulnerable but ended up not collapsing. This approach disentangles the actual economic effects of the dam rupture from the information value of the government alert. These notifications have a detrimental impact on municipalities’ local economic and financial conditions: local consumption declines, labor markets concentrate on less industrialized sectors, and financial development decreases. We also find that the government alerts diffuse to neighboring municipalities with a magnitude inversely proportional to the neighboring municipality’s distance to the notified dam. Our findings highlight the importance of incorporating negative externalities associated with potential environmental disasters into mining companies’ costs as a way to mitigate disasters.

Keywords: Environmental risk; Mining disaster; Government alert; Surveillance; Spillover (search for similar items in EconPapers)
JEL-codes: O4 Q01 Q51 Q53 Q56 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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DOI: 10.1007/s10640-022-00736-4

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