Wealth And Income Effects Of Natural Disasters: An Econometric Analysis Of Hurricane Hugo

Paulo Guimaraes, Frank L. Hefner and Douglas Woodward ()
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Frank L. Hefner: University of South Carolina

The Review of Regional Studies, 1993, vol. 23, issue 2, 97-114

Abstract: Following natural disasters, many regions face substantial losses of wealth. However, some sectors experience temporary gains in economic activity as a result of insurance claims and other short-term income flows. This paper examines the economic gains and losses from Hurricane Hugo in South Carolina. The analysis is based on a multi-sector regional econometric model, which allows us to examine the state's economy "with and without" the storm. We first obtained estimates based on pre-Hugo period data. Then, we simulated the state's economy in the post-Hugo period based on the actual values of national economic variables during the reconstruction period-yielding the "without" storm estimates. We found that the income gains were neutral overall, despite a major surge in some sectors. Even in these sectors, the economic gain remained below the unreimbursed wealth loss. Thus, the catastrophe had a net negative economic effect.

Date: 1993
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