Earthquake vulnerability reduction program in Colombia: a probabilistic cost-benefit analysis

Francis Ghesquiere, Luis Jamin and Olivier Mahul

No 3939, Policy Research Working Paper Series from The World Bank

Abstract: Cost-benefit analysis is a standard tool for determining the efficiency of planned projects. But one of the major difficulties in risk mitigation investments is that benefits are by nature uncertain. In this context, the standard approach relying on the average value of benefits may provide an incomplete picture of the efficiency of the risk mitigation project under consideration. This paper presents a probabilistic cost-benefit analysis relying on a catastrophe risk model. It produces risk metrics such as the exceedance probability curve of the benefit-cost ratio, thus providing the decisionmaker with a more complete risk analysis of the net benefits of the project. This is illustrated with the earthquake vulnerability reduction project in Colombia.

Keywords: Insurance&Risk Mitigation; Investment and Investment Climate; Banks&Banking Reform; Natural Disasters; Non Bank Financial Institutions (search for similar items in EconPapers)
Date: 2006-06-01
New Economics Papers: this item is included in nep-env, nep-fmk and nep-ias
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:wbk:wbrwps:3939

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