Evidence from India. First, I only use the damage fraction due to maximum wind speed of tropical cyclones. I am grateful for comments made by Axel Dreher, Vera Eichenauer, Andreas Fuchs, Lennart Kaplan, Eric Strobl, and Christina Vonnahme. \end{array}\right. } Hurricane Florence - Wikipedia Econometrica 80(5):19772016, Article (2012) demonstrate that only the agricultural sector is negatively affected. The number in parentheses compares the coefficients to the sample average of the respective InputOutput coefficient (in %). In total, the majority of all sectoral aggregates experience lagged negative growth effects due to tropical cyclones. In addition to damaging wind speed, salty sea spread and storm surge can cause salinization of the soil, leaving it useless for cultivation. The findings could help to explain why there has been no discernible change in the number of tropical cyclones occurring globally over the past 40 years, says Murakami: "We don't find any clear trend in the number of global tropical cyclones over the last 40 years. How did the tropical cyclone impact environment Florence? | how did (Color figure online). Additionally, within the agriculture, hunting, forestry, and fishing sectors, only the fishing sector experiences indirect negative effects. Moody's estimates that the property loss and direct damages from Hurricane Florence will total $17-22 billion, making it one of the top 10 costliest natural disasters in US history. 00:00 00:00 An unknown error has occurred J Dev Econ 88(2):221231, Onuma H, Shin KJ, Managi S (2020) Short-, medium-, and long-term growth impacts of catastrophic and non-catastrophic natural disasters. The cumulative effects are calculated by F-tests of the respective lag lengths; for example, the coefficient and confidence intervals after two years are calculated by the F-test: Damage+L1.Damage+L2.Damage. J Eur Econ Assoc 18(6):33373375, Forster J, Schuhmann PW, Lake IR, Gill JA (2012) The influence of hurricane risk on tourist destination choice in the Caribbean. Other basins have different names for the same phenomenon: tropical cyclone. 2019), and the sector other activities (JP) comprises, among others, the financial sector. https://unstats.un.org/unsd/snaama/assets/pdf/methodology.pdf, United Nations Statistical Division (2015c) UN data. Economic impact of Hurricane Florence set to devastate US east coast 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. 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. Stat Softw Compon S352601. The purpose of this study is to advance our understanding of anthropogenic influences on tropical cyclones by quantifying the impact of climate change so far, and in the future, on the intensity . 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. 6. Appendix A.3 provides a more detailed description of the composition of the individual ISIC categories. 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. This assumption is relaxed in further specifications by allowing more flexible country-specific trends (e.g., squared). As investors kept their eyes on the weather and its potential for destruction, estimates emerged of up to $27 billion in hurricane damage. Figure 8 also offers an explanation for the downturn of the mining and utilities (C&E) sector aggregate after some years, as shown in Fig. Since the sample period is reduced to 19902015 due to data availability, I re-estimated the regression model of the main specification 2 for the reduced sample of model 6. Last week, the East Coast prepared for Hurricane Florence, which roared through the Carolinas and Georgia. Additionally, this finding undermines the urgency to analyze past influences beyond one or two years when examining the economic impacts of natural disasters. However, the InputOutput analysis shows that production processes are sticky and indirect economic effects are limited. The coefficients show the increase of the respective damage variable by one standard deviation. Ecol Econ 85:105115, Schreck CJ, Knapp KR, Kossin JP (2014) The impact of best track discrepancies on global tropical cyclone climatologies using IBTrACS. First, I run two randomization tests: a Placebo test by using leads instead of the contemporaneous measure of the damage variable and a Fisher randomization test, where I randomly permute the years.Footnote 29 Second, to rule out potential omitted variable biases, I include additional climatological variables (precipitation and temperature) and a set of socioeconomic variables (population growth rate, economic openness, the growth rate of the gross capital formation, and logged per capita value added of the respective sector).Footnote 30 Third, I test different trend specifications: region-specific, nonlinear, and no trends at all. Table 1 presents the results of the main specification for each of the seven annual sectoral GDP per capita growth rates. However, the country fixed effects partly control for this concern. World Bank Policy Research Working Paper 5507. http://hdl.handle.net/10986/3991, Heinen A, Khadan J, Strobl E (2018) The price impact of extreme weather in developing countries. The increase in tropical cyclone losses has led to concern that anthropogenic climate change is contributing to this trend. Appendix Table 43 and 54 show that the results remain qualitatively unchanged. This importance for the sectoral composition was already demonstrated by Bulte etal. Globally they are among the most destructive natural hazards. From 1980 to 2018 tropical cyclones were responsible for nearly half of all natural disaster losses worldwide, with damage amounting to an aggregate of USD 2111 billion (Munich Re 2018). 4. For the agricultural sector, I use the fraction of exposed agricultural land, while for the remaining sectors, I use the gridded population. With this paper, I close this research gap by using an InputOutput panel data set to analyze potential sectoral interactions after the occurrence of a tropical cyclone. On average, the sector aggregates agriculture, hunting, forestry, and fishing (A&B) and mining and utilities (C&E) are only slightly dependent on other sectors, while there is a stronger dependence for the remaining sectoral aggregates. 2014) remain. In this respect, the results of this research can also be used to calculate the future costs of climate change. The situation is completely different in the wholesale, retail trade, restaurants, and hotels sector aggregate, where a negative influence can be observed over almost the entire 20-year period. The largest negative impacts can be attributed to the annual growth in the agriculture, hunting, forestry, and fishing sector aggregate, where a standard deviation increase in tropical cyclone damage is associated with a decrease of 262 percentage points of the annual sectoral growth rate. Nevertheless, we can learn from this analysis the important role of those manufacturing sectors that are not directly affected. Use the Previous and Next buttons to navigate the slides or the slide controller buttons at the end to navigate through each slide. Cyclone Ingrid - Wikipedia Additionally, Cole etal. The remaining variables are defined as in Eq. For sectoral GDP effects, however, no such evidence exists so far. 2014). The agricultural sector relies heavily on environmental conditions as most of its production facilities lie outside of buildings and are hence more vulnerable to the destructiveness of tropical cyclones. The error bars depict the 95% confidence intervals. In particular, I calculated the leverage and dfbeta of the damage coefficient. (2012) investigate the effect of natural disasters on three sectors (agriculture, manufacturing, service) in a global sample for the period 19612005. 2632). 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. This does not mean that there have to exist a permanent negative growth effect for every period after the disaster. 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. Rev Econ Stat 93(2):575589, Strobl E (2012) The economic growth impact of natural disasters in developing countries: evidence from hurricane strikes in the Central American and Caribbean Regions. PDF 4.5: Economic Impacts of Tropical Cyclones - University of Colorado Boulder The growth literature predicts that some potential positive or negative impacts of natural disasters emerge only after a few years. As tropical cyclones are exogenous to sectoral economic growth, the greatest threat to causal identification could arise by omitting important climatic variables that are correlated with tropical cyclones (Auffhammer etal. As my panel has a length of 2545years, depending on the chosen model, I assume this bias will not influence my analysis.Footnote 19 Second, all control variables are measured in \(t-1\) to reduce potential endogeneity problems stemming from the fact that control variables in t can also be influenced by tropical cyclone intensities in t (Dell etal. Notes This figure demonstrates the distribution of the tropical cyclone damage variable (in standard deviations) for exposed agricultural areas (a) and exposed population (b) from 1970 to 2015, Figure 3 shows the country-year observations of the tropical cyclone damage variable for (a) exposed agricultural land and (b) exposed population. It . Rev Econo Stat 101, Botzen WJW, Deschenes O, Sanders M (2019) The economic impacts of natural disasters: a review of models and empirical studies. NBER Working Paper 20352. http://www.nber.org/papers/w20352.pdf, Islam N (1995) Growth empirics: a panel data approach. 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. Compared to the existing literature, the non-existing of a direct positive contemporaneous response of the construction sector is a new finding. What will Hurricane Florence impact be on the economy? Cumulative lagged influence of tropical cyclone damage on sectoral GDP growth (20years). Based on damage estimates from EM-DAT, the authors find a negative effect for the agricultural and a positive effect for the industrial sector. \end{aligned}$$, https://doi.org/10.1007/s10640-021-00541-5, The economic impact of climate risks in China: evidence from 47-sector panel data, 20002014, The Impact of Hurricane Strikes on Short-Term Local Economic Activity: Evidence from Nightlight Images in the Dominican Republic, ICT diffusion and climate change: The role of economic growth, financial development and trade openness, CO2, SO2 and economic growth: a cross-national panel study, The Effects of Natural Disasters and Weather Variations on International Trade and Financial Flows: a Review of the Empirical Literature. 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 ). However, as an additional robustness test, I also show a regression where I include these outliers and the results remain unchanged. How Tropical Cyclone Eloise Impacted the Economy Power cables and telephone lines come down, crops are ruined, and water and sewage supplies are affected. Springer, Dordrecht, New York, pp 481494, Chapter Moreover, for the vast majority of sectors, the indirect effects do not last longer than oneyear. Concurrently, the construction sector demands significantly more input (1.84%) from the agriculture, hunting, forestry, and fishing sector. Possible mechanisms for this situation are, for example, additional capital flowssuch as remittances from relatives living abroad (Yang 2008)international aid (deMel etal. Cyclone Nivar and its Impact | Civils360 IAS https://www.munichre.com/en/solutions/for-industry-clients/natcatservice.html, Newey WK, West KD (1987) A simple, positive semi-definite, heteroskedasticity and autocorrelation consistent covariance matrix. The radius of maximum wind (R, in km) is related to the latitude (L) of the respective raw data tropical cyclone position in the following way: Since the tropical cyclone data are available at global coverage since 1950, I will extend my database later for further specifications. In addition, they can also have a significant impact on the national economy, particularly in countries like India where a large proportion of the population is dependent on agriculture. 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. Admittedly, this will not fully solve potential endogeneity problems, and concerns about bad controls (Angrist & Pischke 2009) and over-controlling (Dell etal. Econ Syst Res 29(3):452461, Ouattara B, Strobl E (2013) The fiscal implications of hurricane strikes in the Caribbean. Put in relation to the sample average per capita growth rate (2.53%), the effect translates to a decrease of \(-46\)%. Unraveling the Effects of Tropical Cyclones on Economic Sectors Hurricane Florence Case Study - Internet Geography It is possible that the economy exhibits positive growth rates after a first negative growth shock. In response to this, numerous studies of databases1 from around the world have been undertaken to examine the factors responsible for this increase. However, since agricultural areas are seldom highly populated, using a population-weighted damage function for the agricultural sectors would be biased. Tropical Cyclone Freddy on track to become record-breaking storm 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. The variables are measured in constant 2005 USD. The sample period hence reduces to 19712015. Nearly 2 million people have died globally due to tropical cyclones. For the latitude and longitude the model takes a spline interpolation, whereas for intensity and time observations it uses a linear interpolation. The storm damaged and destroyed famand, vital infrastructure and thousands of homes, dealing another devastating blow to families still trying to put their lives together after. Table 21 in Appendix A.5 reveals that even with the smaller sample, all previously found effects can be identified again. Storms that are strongest originate off the west coast of Africa because they have two weeks worth of warm water to build up over. Torrential rainfall can cause serious in-land flooding, thereby augmenting the risk coming from storm surges (Terry 2007). J Econ Geogr 19(2):373408, Cuaresma JC, Hlouskova J, Obersteiner M (2008) Natural disasters as creative destruction? It claimed overall more than 50 deaths. Energy Econ 46:576592, Kruk MC, Knapp KR, Levinson DH (2010) A technique for combining global tropical cyclone best track data. In contrast, for the agricultural sector, it would be misleading to take a nighttime light or a population weight, since these areas have a rather low population density. Given these positive demand effects, one may ask why a significant contemporaneous positive direct effect for the construction sector cannot be seen. Thus, tropical cyclones are and will continue to be a serious threat to the life and assets of a large number of people worldwide. Given the different theoretical possibilities, it is not surprising that the empirically identified effects are rather ambiguous. 16 in Appendix A.5. 2019) or the destruction of vessels. Furthermore, a shortage in the labor force can lead to a wage increase, which can serve as an incentive for workers from other regions to migrate to the affected region, also leading to a positive effect (Hallegatte and Przyluski 2010). Additionally, a new damage measure is developed that considers the varying levels of exposure of different sectors. Significant effects of tropical cyclone damage on InputOutput coefficients. 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). Cyclone Eloise. 2008; Mendelsohn etal. 2013), I control for the mean temperature and precipitation of a country in further specifications. Open Access funding enabled and organized by Projekt DEAL. Some areas experience record rainfall with widespread flooding and predictions for it to get worse. Notes The y-axis displays the cumulative coefficient of tropical cyclone damage on the respective per capita growth rates, and the x-axis shows the years since the tropical cyclone passed. Econometrica 55(3):703708, Newson R (1998) PARMEST: Stata module to create new data set with one observation per parameter of most recent model. volume78,pages 545569 (2021)Cite this article. Future weather. They are, however, aware of data problems, such as incomplete reports, fluctuating quality of the reports, and correlation with GDP. 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. 2017) at a spatial resolution of around \(10\,\times \,10\)km.Footnote 10 To avoid potential endogeneity concerns, I lag the respective weights by one period. The gray shaded area specifies the respective 95% confidence bands, and the red line depicts the connected estimates. 2012), and the higher exposure of people in large urban agglomerations near oceans (World Bank 2010), the overall damage and the number of people affected by tropical cyclones have been increasing since the 1970s (Guha-Sapir and CRED 2020). Latent Heat and Its Impact on Tropical Cyclones. 2015). It is evident from this analysis that many potential production changes are canceled out because of counteracting indirect effects. Ten mass-feeding kitchens were set up. Alfred-Weber-Institute for Economics, Heidelberg University, Bergheimerstrasse 58, Heidelberg, 69115, Germany, You can also search for this author in 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. Tropical Cyclone Cheneso was a strong tropical cyclone that affected Madagascar in January 2023. Int J Remote Sens 38(21):59926006, Mohan PS, Spencer N, Strobl E (2019) Natural hazard-induced disasters and production efficiency: moving closer to or further from the frontier? As tropical cyclones are highly correlated with higher temperature and precipitation (Auffhammer etal. It is not empirically clear how long past tropical cyclones influence present economic growth rates.
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