Evidence for sharp increase in the economic damages of extreme natural disasters

Matteo Coronese, Francesco Lamperti, Klaus Keller, Francesca Chiaromonte and Andrea Roventini

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Abstract: Climate change has increased the frequency and intensity of natural disasters. Does this translate into increased economic damages? To date, empirical assessments of damage trends have been inconclusive. Our study demonstrates a temporal increase in extreme damages, after controlling for a number of factors. We analyze event-level data using quantile regressions to capture patterns in the damage distribution (not just its mean) and find strong evidence of progressive rightward skewing and tail-fattening over time. While the effect of time on averages is hard to detect, effects on extreme damages are large, statistically significant, and growing with increasing percentiles. Our results are consistent with an upwardly curved, convex damage function, which is commonly assumed in climate-economics models. They are also robust to different specifications of control variables and time range considered and indicate that the risk of extreme damages has increased more in temperate areas than in tropical ones. We use simulations to show that underreporting bias in the data does not weaken our inferences; in fact, it may make them overly conservative.

Keywords: climate change; natural disasters; simulations (search for similar items in EconPapers)
Date: 2019-10-07
Note: View the original document on HAL open archive server: https://sciencespo.hal.science/hal-04096149
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Citations: View citations in EconPapers (4)

Published in Proceedings of the National Academy of Sciences of the United States of America, 2019, 116 (43), pp.21450-21455. ⟨10.1073/pnas.1907826116⟩

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Related works:
Journal Article: Evidence for sharp increase in the economic damages of extreme natural disasters (2019)
Working Paper: Evidence for sharp increase in the economic damages of extreme natural disasters (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04096149

DOI: 10.1073/pnas.1907826116

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