On the Social Cost of Water-Related Disasters

Per-Olov Johansson () and Bengt Kriström
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Per-Olov Johansson: Stockholm School of Economics, Stockholm, Sweden
Bengt Kriström: Swedish University of Agricultural Sciences, Umeå, Sweden;

Water Economics and Policy (WEP), 2015, vol. 01, issue 03, 1-26

Abstract: This paper is devoted to some important welfare economic issues related to natural disasters, in particular those connected with floods and storms. Our analysis of the social cost of a natural disaster is different from (most) existing analyses, in that we focus sharply on the welfare effects of a disaster. We derive a simple dynamic general equilibrium cost–benefit rule, which captures loss in production of private and public goods, as well as the value of (statistical) lives lost; it also clarifies the role played by changes in stocks and flows, respectively. Standard analysis of losses typically only includes damages to market-priced stocks and flows, thus our model paints a different picture of social cost. This difference is particularly striking for disaster that results in many deaths, but has relatively low (reported) costs. We take our model to the data by using EM-DAT, one of the several prominent databases in this literature, focusing on water-related disasters in the US.

Keywords: Natural disasters; water use; rules; cost–benefit analysis; dynamic models; EM-DAT (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (1)

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DOI: 10.1142/S2382624X15500150

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