The Social Value of Hurricane Forecasts

Renato Molina and Ivan Rudik

No 32548, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: What is the impact and value of hurricane forecasts? We study this question using newly-collected forecast data for major US hurricanes since 2005. We find higher wind speed forecasts increase pre-landfall protective spending, but erroneous under-forecasts increase post-landfall damage and rebuilding expenditures. Our main contribution is a new theoretically-grounded approach for estimating the marginal value of forecast improvements. We find that the average annual improvement reduced total per-hurricane costs, inclusive of unobserved protective spending, by $700,000 per county. Improvements since 2007 reduced costs by 19%, averaging $5 billion per hurricane. This exceeds the annual budget for all federal weather forecasting.

JEL-codes: Q54 Q58 (search for similar items in EconPapers)
Date: 2024-06
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