What impact do cyclones have on the economy? | how did tropical cyclone Once it makes landfill, Florence is expected to lash coastal communities with 130-mph winds and to dump several feet of water. However, time-delayed effects must also be taken into account since some damage, such as supply-chain interruptions or demand-sided impacts, will only be visible after a certain time lag (Kousky 2014; Botzen etal. Nat Clim Change 2(3):205209, Miranda JJ, Ishizawa OA, Zhang H (2020) Understanding the impact dynamics of windstorms on short-term economic activity from night lights in Central America. 2019), Felbermayr and Grschl (2014) show that storms from the previous fiveyears can also have a negative growth effect. The main causal identification stems from the exogenous nature of tropical cyclones, whose intensity and position are difficult to predict even 24h before they strike (NHC 2016). The results can be found in Fig. 2010). Notes This figure shows the effect of a one standard deviation increase in tropical cyclone damage on the per capita sectoral GDP growth rate compared to the respective sample average. Hsiang (2010) also finds the largest negative effects of tropical cyclones for the agricultural sector aggregate, while Loayza etal. Environ Resource Econ 78, 545569 (2021). Bakkensen LA, Park D-SR, Sarkar RSR (2018) Climate costs of tropical cyclone losses also depend on rain. These surges, sometimes called tidal waves, can drown people and animals, and are often the greatest killers in a cyclone. Sven Kunze. J Monet Econ 43(2):391409, Elliott RJ, Strobl E, Sun P (2015) The local impact of typhoons on economic activity in China: a view from outer space. How do tropical storms affect people and the environment? Economic impact of Hurricane Florence set to devastate US east coast The wind speed drops with distance to the center of the hurricane and as soon as it makes landfall. Consequently, \(\beta ^j\) is the coefficient of main interest in this specification. By calculating the annual sectoral GDP per capita growth rate, I lose the first year of observation of the panel. 2.Economy 3.People /communities Google Scholar, Kousky C (2014) Informing climate adaptation: a review of the economic costs of natural disasters. Admittedly, this will not fully solve potential endogeneity problems, and concerns about bad controls (Angrist & Pischke 2009) and over-controlling (Dell etal. The coefficients range between zero and one. (Color figure online). Latent heat is another critical factor that influences the development of tropical cyclones. Kunze, S. Unraveling the Effects of Tropical Cyclones on Economic Sectors Worldwide: Direct and Indirect Impacts. 4 displays the average InputOutput coefficients for all countries for all available years (19902015). Furthermore, one can argue that only countries exposed to tropical cyclones are relevant for this analysis; therefore, Table 36 provides a regression of the main result for exposed countries only. Some areas experience record rainfall with widespread flooding and predictions for it to get worse. [2] Between 1979 and 2017, there was a global increase in the proportion of tropical cyclones of Category 3 and higher on the Saffir-Simpson scale. J Econ Geogr 19(2):373408, Cuaresma JC, Hlouskova J, Obersteiner M (2008) Natural disasters as creative destruction? This paper contributes to two strands of the literature. The winds are driven by this low-pressure core and by the rotation of Earth, which deflects the path of the wind through a phenomenon known as the Coriolis force. Earth Syst Sci Data 9(2):927953, Klomp JG, Valckx K (2014) Natural disasters and economic growth: a meta-analysis. Glob Environ Change 26:183195, Knapp KR, Kruk MC, Levinson DH, Diamond HJ, Neumann CJ (2010) The international best track archive for climate stewardship (IBTrACS). Excellent proofreading was provided by Jamie Parsons and Harrison Bardwell. Furthermore, although the manufacturing sector shows no direct monetary damage, it is responsible for several changes in the production schemes of other sectors, leading to a monetary downturn in the mining and utilities (C&E) sectoral aggregate. The different economic activities are classified as follows with the respective ISIC codes given in parentheses: agriculture, hunting, forestry, and fishing (A&B); mining, and utilities (C&E); manufacturing (D); construction (F); wholesale, retail trade, restaurants, and hotels (GH); transport, storage, and communication (I); other activities (JP), which include, inter alia, the financial and government sector. The authors find that after the 2008 Wenchuan Earthquake neighboring counties suffer from indirect negative growth effects due to changes within the manufacturing sectors. On Sunday it moved on from Zimbabwe to dump heavy rain on some areas of South Africa's Limpopo, Mpumalanga and KwaZulu-Natal provinces, authorities there said. Nature 455(7209):9295, Emanuel K (2011) Global warming effects on U.S. hurricane damage. This suggests that the production chains of the economy are only slightly disrupted by tropical storms, and indirect impacts are thus negligible. Economic sectors most vulnerable to direct capital destruction of tropical cyclones must be identified. The individual colors represent different wind speed intensities. The outcomes of this study can serve as a guide for local governments and international organizations to revise and refine their adaptation and mitigation strategies. At first, the circulation was ill-defined, but by the evening and overnight, persistent convection had occurred and was beginning to show signs of better organization. Below is the link to the electronic supplementary material. Hurricane Florence was a powerful and long-lived Cape Verde hurricane that caused catastrophic damage in the Carolinas in September 2018, primarily as a result of freshwater flooding due to torrential rain. Each year the impacts of tropical cyclones and other weather, climate and water extremes around the Earth give rise to multiple casualties and significant damage to property and infrastructure, with adverse economic consequences for communities that can persist for many years. The storm was named by the Australian Bureau of Meteorology on 4 February and and finally came to an end on 14 March. However, these growth rates are simply not high enough to reach the pre-disaster growth path. However, to control for possible rainfall damage, I conduct a robustness test which includes a variable for precipitation (see Appendix Table 24 and and Figs. Direct impacts on commercial property and infrastructure can lead to production shortfalls. Bull Am Meteorol Soc 91(3):363376, Knutson T, Camargo SJ, Chan JC, Emanuel K, Ho C-H, Kossin J, Mohapatra M, Satoh M, Sugi M, Walsh K et al (2020) Tropical cyclones and climate change assessment: part II: projected response to anthropogenic warming. (2020) provide evidence that after hurricane strikes in Central America, a short-term negative growth period (12months) is compensated by a positive recovery in the second year. Older empirical studies suffer to a large extent from endogeneity problems in their econometric analysis because their damage data are based on reports and insurance data, such as the Emergency Events Database (EM-DAT). 2012, 2013). Anatomy of monster storm: how Cyclone Ilsa is shaping up to devastate It . 5. Nevertheless, it unveils the importance of the manufacturing sectors, as already demonstrated by their strong intersectoral connection in Fig. A strong pressure gradient rapidly developed within the system as it headed west resulting in a category rating of 5 by 8 March. 1.Environment . Therefore, we can be sure that the reduced sample size does not drive the new results. To be consistent with the remaining analysis, I aggregate the given 26 sectors to the previously used seven sectoral aggregates.Footnote 14 For my analysis, I calculate the InputOutput coefficients by dividing the specific input of each sector by the total input of each sector given in the transaction matrix of the data: The resulting InputOutput coefficients \(IO^{j,k}\) range between 0 and 1 in year t. They indicate how much input from sector k is needed to produce one unit of output of sector j. Consequently, the InputOutput coefficients give an idea of the structural interactions of sectors within an economy and hence help to disentangle the indirect effects of tropical cyclone damage.Footnote 15. Taking all considerations together, I calculate the following tropical cyclone damage for each country i and year t: where \(w_{g,t-1}\) are the exposure weights, agricultural land, or population, in grid g in period \(t-1\). Second and most importantly, I contribute to the literature on InputOutput analysis of natural disasters. In: Bobrowsky PT (ed) Encyclopedia of natural hazards. In order to design effective mitigation and adaptation disaster policies to this threat, it is important to understand the economic impact of natural disasters. I show that tropical cyclones have a significantly negative impact on the annual growth rate of two sectoral aggregates: agriculture, hunting, forestry, and fishing and wholesale, retail trade, restaurants, and hotels. Generally speaking, the proposed models offer a simple but strong way for causal interpretation of the impact of tropical cyclones on sectoral growth. Other studies analyze the disasters impact on single sectors, such as the agricultural (Blanc and Strobl 2016; Mohan 2017) or the manufacturing sector (Bulte etal. In coastal areas, storm surges can lead to flooding, the destruction of infrastructures and buildings, the erosion of shorelines, and the salinization of the vegetation (Terry 2007; Le Cozannet etal. Therefore, I include the mean level of temperature and precipitation as additional climate controls in a further specification. The sum of these exposure weights \(w_{g,t-1}\) is divided by the total sum of the weights \(W_{i,t-1}\) in country i in period \(t-1\). Since the EORA26 database also offers the data decomposed for 26 sectors, this section demonstrates the results of model 6 in more detail. Since the tropical cyclone data has global coverage since 1950, I am able to introduce lags of up to 20years without losing observations of my dependent variable, which ranges from 1971 to 2015. This behavior most likely speaks for an enduring risk adjustment of tourists. While the distribution reveals that on average, geographically smaller countries, such as Hong Kong, Dominica or Jamaica, have a higher damage, there exists a difference between both damage measures, even for the highly exposed countries. Anthropogenic influences on major tropical cyclone events 2014) remain. The Aftermath of Hurricane Florence | AIR Worldwide How did the tropical cyclone Eloise impact the economy and people. Econ J 122(559):6491, Dell M, Jones BF, Olken BA (2014) What do we learn from the weather? The start of the arrow shows the input, and the end denotes the respective output. (2012) only differentiate between three sectors: agriculture, manufacturing, and service. (Color figure online). Tropical cyclones only lead to a small number of production process changes with coefficients being relatively small. Furthermore, the results of the randomization test show that the \(H_0\) of no effect of tropical cyclone damage can be rejected at the 1% and 5% level of confidence for the agriculture, hunting, forestry, and fishing and wholesale, retail trade, restaurants, and hotels sectors, respectively. Freddy: The deadly cyclone that lasted more than a month High levels of moisture in the air and low wind sheer formed showers and thunderstorms. Ten mass-feeding kitchens were set up. The variables are measured in constant 2005 USD. Color intensities indicate p values according to: \(p<0.01\), \(p<0.05\), \(p<0.1\). Across the Caribbean the economic costs of tropical cyclones amount to 2% of GDP annually since the 1950. Once the surface winds have reached a maximum sustained speed of 39 mph (63 km/h), it is classified as a tropical storm. Read the InFocus blog post on climate change and flooding Hsiang (2010) also finds a negative effect of hurricanes for this sectoral aggregate for the Caribbean countries, whereas Loayza etal. 2 contains a description of the data source, introduces the construction of the tropical cyclone damage measure, and presents descriptive statistics. Springer, Dordrecht, New York, pp 481494, Chapter The tests are conducted with the STATA command parmest (Newson 1998). These regions include East Asia and Pacific, Europe and Central Asia, Latin America and Caribbean, Middle East and North Africa, North America, South Asia, and Sub-Saharan Africa. In the first test, I introduce a variable which counts the yearly frequency of tropical cyclones above 92 km/h per country (see Appendix Table 40 and Figs. In Pictures: Cyclone Eloise displaces thousands in Mozambique The different colors represent different average coefficients, ranging from 0 (light purple) to 0.24 (dark purple). This finding undermines the evidence presented in the main specification: Even several years after the occurrence of a tropical cyclone, tourists avoid restaurants and hotels in devastated areas. The analysis of the past influences of tropical cyclone damage demonstrates that the sectoral growth response following a tropical cyclone is a complex undertaking. An exception forms the mean damage robustness test for the wholesale, retail trade, restaurants, and hotels sectors, where the coefficient turns slightly insignificant (\(p=0.12\)). In addition to damaging wind speed, salty sea spread and storm surge can cause salinization of the soil, leaving it useless for cultivation. www.emdat.be, Haimes YY, Jiang P (2001) Leontief-based model of risk in complex interconnected infrastructures. Estimated economic cost of Cyclone Pam in Vanuatu across all sectors was approximately 64% of the country's GDP in 2016. Within the agriculture, hunting, forestry, and fishing sectors, the negative effects become less pronounced with a zero effect being present after fouryears, while the wholesale, retail trade, restaurants, and hotels sectoral aggregate experiences a persistent negative growth even after 20years. B.E. Cyclones also can bring torrential rains that lead to flooding. To view a copy of this licence, visit http://creativecommons.org/licenses/by/4.0/. Therefore, in this section, I investigate, by means of the InputOutput analysis, how the sectors change their interaction after a tropical cyclone has hit a country. To analyze potential indirect effects which could emerge because of changes in the InputOutput composition of the individual sectors, I test the following set of equations for the different Input(j)Output(k) combinations: where \(IO_{i,t}^{j,k}\) indicates the InputOutput coefficient of sectors j and k in year t and country i. The data are collected every year for as many countries and regions as possible.Footnote 11 The sample used in my analysis covers the 19702015 period and includes a maximum of 205 countries.Footnote 12, To analyze potential sectoral shifts within the economy after a tropical cyclone, I take advantage of the InputOutput data of EORA26 (Lenzen etal. First, I account for the economic exposure by weighting the maximum occurred wind speed per grid cell and year by the number of exposed people living in that grid cell relative to the total population of the country. 4.2 demonstrates, this effect may be driven by less demand from the manufacturing sectors. Notes This figure shows the significant effects of a one standard deviation increase in tropical cyclone damage on the respective InputOutput coefficient. Possible mechanisms for this situation are, for example, additional capital flowssuch as remittances from relatives living abroad (Yang 2008)international aid (deMel etal. As per the guidelines of the World . Additionally, Cole etal. Tropical cyclones are large, cyclonically rotating wind systems that form over tropical or sub-tropical oceans and are mostly concentrated on months in summer or early autumn in both hemispheres (Korty 2013). 4. Economics of Disasters and Climate Change (pp. Furthermore, one could also argue that the estimation results are biased by the fact that certain regions have a higher exposure to tropical cyclones than others. In particular, I calculated the leverage and dfbeta of the damage coefficient. Econ Syst Res 29(3):452461, Ouattara B, Strobl E (2013) The fiscal implications of hurricane strikes in the Caribbean. Global warming has 'changed' spread of tropical cyclones around the world To implement the Fisher randomization test, I use the code generated by He (2017) and randomly permute the years of the tropical cyclone damage variable for 2000 repetitions. Google Scholar, Albala-Bertrand J-M (1993) Natural disaster situations and growth: a macro-economic model for sudden disaster impacts. Perhaps the most challenging task is to identify critical sectors that may be responsible for widespread spillover effects leading to substantial modifications in other sectors production input schemes. Appendix Table 43 and 54 show that the results remain qualitatively unchanged. Energy Econ 46:576592, Kruk MC, Knapp KR, Levinson DH (2010) A technique for combining global tropical cyclone best track data. Second, I use this new damage data to analyze all (exposed) countries (84) to tropical cyclones worldwide, which allows me to obtain more generalizable results.Footnote 2 Third, I conduct a thorough assessment of the long-term sectoral influences of tropical cyclones, as there is evidence, that long-term effects on total GDP exist (Felbermayr and Grschl 2014; Hsiang and Jina 2014; Onuma etal. Agricultural land and population count in Australia, 2008. This change can be regarded as reconstruction efforts, which is also reflected in the relatively rapid recovery of the agricultural sector aggregate in Fig. On the other hand, EORA26 works continuously on quality check reports and compares its result to other InputOutput databases such as GTAP or WIOD.Footnote 13. Clim Change 114(3):745768, Ghosh A (1958) Input-output approach in an allocation system. The most interesting changes can be observed within the single sectors of the manufacturing (D) aggregate. A study led by Kevin Reed, PhD, Assistant Professor in the School of Marine and Atmospheric Sciences (SoMAS) at Stony Brook University, and published in Science Advances, found that Hurricane. To underpin the causal identification, I conduct a falsification test, where I introduce leads instead of lags of the Damage variable, as well as a Fisher randomization test. The recovery to trend hypothesis characterizes a pattern where after a negative effect in the short run, the economy recovers to the previous growth path after some time. However, we still can learn from this analysis of how certain direct effects evolve. Ann Rev Resour Econ 8(1):4375, Hsiang SM, Jina AS (2014) The causal effect of environmental catastrophe on long-run economic growth: evidence from 6,700 cyclones. In terms of total losses, this decrease results in a mean yearly loss of USD \(-\,16.7\) billion (measured in constant 2005 USD) for the sample average (USD 5.63 billion). The increase in tropical cyclone losses has led to concern that anthropogenic climate change is contributing to this trend. 2632). Sectoral GDP is defined as gross value added per sector aggregate and is collected for different economic activities following the International Standard Industrial Classification (ISIC) revision number 3.1. The storm is expected to affect Duke Energy's 1,870 megawatt (MW) Brunswick and 932MW Harris nuclear plants in North Carolina, as well as potentially the 1,676MW Surry plant in Virginia, owned by Dominion Energy. To identify the causal effects of tropical cyclone intensity on sectoral per capita growth, I use the following set of regression equations, which constitutes my main specifications: where the dependent variable \(Growth_{i,t-1->t}^j\) is the annual value added per capita growth rate of sector j in country i. More recent studies have started to use physical data, such as observed wind speeds, to generate a more objective damage function for the impacts of tropical cyclones (e.g., Hsiang 2010; Strobl 2011; Felbermayr and Grschl 2014; Bakkensen etal. Figure 8 reveals some patterns that are not visible on the aggregate level. Note that InputOutput coefficients can only range between 0 and 1. However, the InputOutput analysis shows that production processes are sticky and indirect economic effects are limited. The underlying calculations for these numbers are as follows: agricultural damage: 91/1027 = 0.0886, population damage: 82/1035 = 0.0801. This is a well-established method (Strobl 2012; Heinen etal. Google Scholar, Auffhammer M, Hsiang SM, Schlenker W, Sobel A (2013) Using weather data and climate model output in economic analyses of climate change. Furthermore, only a minority of studies explicitly investigate the disasters influences on sectoral economic development. Fifteen thousand people were housed in temporary shelters in North Carolina. In total, I exclude five country-year observations from my analysis: Dominican Republic 1979, Grenada 2004, Montserrat 1989, Myanmar 1977, and Saint Lucia 1980. Eur Econ Rev 101:441458, Chhibber A, Laajaj R (2008) Disasters, climate change and economic development in Sub-Saharan Africa: lessons and directions. Direct negative impacts can result from the destruction of productive capital, infrastructure, or buildings, and thereby can generate a negative income shock for the whole economy (Kousky 2014). Open Access funding enabled and organized by Projekt DEAL. Based on the InputOutput analysis, there are only a small number of significant sectoral shifts. Queensland has 20% of Australia's sugar cane production, but . The result offers a better understanding of the finding of Hsiang & Jina (2014), who show that tropical cyclones have long-lasting negative impacts on GDP growth by demonstrating which sectors are responsible for the long-lasting GDP downturn that they identify. 2020). My results indicate that this negative aggregate effect can be attributed to two sectoral aggregates, including agriculture, hunting, forestry, and fishing; manufacturing and wholesale, retail trade, restaurants, and hotels.
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