Financial Consequences of Natural Disasters

Joseph Vinso

Rodney L. White Center for Financial Research Working Papers from Wharton School Rodney L. White Center for Financial Research

Abstract: A community disaster model has been developed at the University of Pennsylvania as part of an NSF-RANN grant ENV-12370, "Mitigation and Recovery Policies for Natural Hazards." The objective of the project is to describe the impact of a natural disaster on a community so as to provide guidance to policy makers in designing mitigation and recovery policies.

One of the more important areas of concern is the financial impact of the disaster. As a result, the community disaster model contains a financial sector which describes the changes which occur in the financial characteristics of households as a result of the disaster and subsequent recovery. The purpose of this paper is to describe this financial sector of the community disaster model, how and why it was developed, and how it may be utilized. First, the need for such a sector is reviewed. Next, the methodology to be used here for analyzing the financial impact of natural disasters on households is outlined. Then, the construction of the elements of the financial sector is discussed followed by an illustrative example. This illustrative example demonstrates the usefulness of the approach developed here for public policy analysis. Finally, the summary and conclusions are presented along with directions for future research.

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Persistent link: https://EconPapers.repec.org/RePEc:fth:pennfi:04-78

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