The Economic and Policy Consequences of Catastrophes

Robert Pindyck and Neng Wang

No 15373, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: How likely is a catastrophic event that would substantially reduce the capital stock, GDP and wealth? How much should society be willing to pay to reduce the probability or impact of a catastrophe? We answer these questions and provide a framework for policy analysis using a general equilibrium model of production, capital accumulation, and household preferences. Calibrating the model to economic and financial data, we estimate the mean arrival rate of shocks and their size distribution, the tax on consumption society would accept to limit the maximum size of a catastrophic shock, and the cost to insure against its impact.

JEL-codes: E20 G01 H56 (search for similar items in EconPapers)
Date: 2009-09
New Economics Papers: this item is included in nep-dge and nep-mac
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Citations: View citations in EconPapers (15)

Forthcoming at the American Economic Journal: Economic Policy

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Related works:
Journal Article: The Economic and Policy Consequences of Catastrophes (2013)
Working Paper: The Economic and Policy Consequences of Catastrophes (2009)
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