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Proc Natl Acad Sci U S A. 2019 Oct 7. pii: 201907826. doi: 10.1073/pnas.1907826116. [Epub ahead of print]

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

Author information

1
Institute of Economics and EMbeDS-Economics and Management in the Era of Data Science, Scuola Superiore Sant'Anna Pisa, 56127 Pisa, Italy.
2
RFF-CMCC European Institute of Economics and the Environment, 20144 Milan, Italy.
3
Department of Geosciences, The Pennsylvania State University, University Park, PA 16802.
4
Institute of Economics and EMbeDS-Economics and Management in the Era of Data Science, Scuola Superiore Sant'Anna Pisa, 56127 Pisa, Italy; fxc11@psu.edu andrea.roventini@santannapisa.it.
5
Department of Statistics, The Pennsylvania State University, University Park, PA 16802.
6
Observatoire Français des Conjonctures Économiques, SciencesPo, BP 85 06902, Sophia Antipolis, France.

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; economic damages; natural disasters; tail effects

PMID:
31591192
DOI:
10.1073/pnas.1907826116
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Conflict of interest statement

The authors declare no competing interest.

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