2010). Nevertheless, it unveils the importance of the manufacturing sectors, as already demonstrated by their strong intersectoral connection in Fig. 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 \(t-1\). Nat Hazards Rev 18(3):04016012, Mohan P, Strobl E (2017) The short-term economic impact of Tropical Cyclone Pam: an analysis using VIIRS nightlight satellite imagery. 2632). I also tested for lagged cumulative effects. This finding clearly opposes the build-back-better hypothesis as well as the recovery to trend hypothesis. This does not mean that there have to exist a permanent negative growth effect for every period after the disaster. The coefficients show the increase of the respective damage variable by one standard deviation. The logged per capita value added is not included for the robustness tests of the indirect effects of model 6, because it already compromises a lagged dependent variable. Hsiang (2010) also finds the largest negative effects of tropical cyclones for the agricultural sector aggregate, while Loayza etal. This may be the reason why, on the aggregate level for indirect influences (see Fig. 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. 1315 show the cumulative results for different lag lengths (5, 10, 15), and Tables 1315 exhibit the underlying estimations. The gray areas represent the respective 95% confidence intervals and the red line indicates the respective (connected) cumulative point estimates. The build-back-better hypothesis describes a situation where natural disasters first trigger a downturn of the economy, which is then followed by a positive stimulus, leading to a higher growth path than in the pre-disaster period. 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). Other basins have different names for the same phenomenon: tropical cyclone. Appendix A.6 exhibits the resulting robustness tests for the direct and indirect sectoral effects.Footnote 33 For the direct sectoral effects, the significant results remain robust in all different specifications underlining their credibility for the empirical model used.Footnote 34 While the placebo test yields no significant coefficients, the coefficients and p-value remain relatively stable in all remaining robustness tests, as summarized in Fig. Ten mass-feeding kitchens were set up. Q J Econ 110(4):11271170, Klein Goldewijk K, Beusen A, Doelman J, Stehfest E (2017) Anthropogenic land use estimates for the holoceneHYDE 3.2. Nature 455(7209):9295, Emanuel K (2011) Global warming effects on U.S. hurricane damage. Additionally, I allow for country-specific linear trends \(\mu _i*t\). However, the presented results are generalized for 205 countries at most, and every specific country should make an analysis of their specific vulnerability and individual exposure. Given that producers in modern economies are . Since climatological impacts are most likely nonlinear, I also include squared precipitation and temperature in a further robustness test. To address the varying economic exposure of affected areas, studies have used population (Strobl 2012), nightlight intensity (Heinen etal. Based on damage estimates from EM-DAT, the authors find a negative effect for the agricultural and a positive effect for the industrial sector. Clim Change 114(3):745768, Ghosh A (1958) Input-output approach in an allocation system. I tested my data extensively for outliers having a high influence on my results. Econ J 122(559):6491, Dell M, Jones BF, Olken BA (2014) What do we learn from the weather? 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. 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. Appendix A.6 first shows the results of the randomization tests, followed by coefficient plots that summarize the remaining specifications. PDF Tropical Cyclones: Impacts, the link to Climate Change and Adaptation Once the surface winds have reached a maximum sustained speed of 39 mph (63 km/h), it is classified as a tropical storm. J Dev Econ 111:92106, Fetzer T (2020) Can workfare programs moderate conflict? Econ Syst Res 29(3):452461, Ouattara B, Strobl E (2013) The fiscal implications of hurricane strikes in the Caribbean. A strong pressure gradient rapidly developed within the system as it headed west resulting in a category rating of 5 by 8 March. Climate change impacted Hurricane Florence's precipitation and size 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. While some studies provide evidence of only a short-term economic impact of tropical cyclones (Bertinelli and Strobl 2013; Elliott etal. 2014). eSwatini also experienced rainfall.. Unraveling the Effects of Tropical Cyclones on Economic Sectors Worldwide: Direct and Indirect Impacts, $$\begin{aligned} S_{g} = {\left\{ \begin{array}{ll} \max (0, ((M - abs(T)) * \frac{R}{D}^\frac{3}{2} *e^{1-\frac{R}{D}^\frac{3}{2}})+T),&{} \text {if }D<10*R \text { from center to outer core} \\ 0, &{} \text {if }D>10*R \text { out of radius}. 2013). In: Bobrowsky PT (ed) Encyclopedia of natural hazards. Hsiang (2010) also finds a negative effect of hurricanes for this sectoral aggregate for the Caribbean countries, whereas Loayza etal. The damaging winds are responsible for serious destruction of buildings and vegetation. This index is then multiplied by the cubed maximum wind speed \(S(max)_{g,t}^{3}\) in grid g and year t as calculated by Eq. 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). It is based on a physical wind model and thereby overcomes criticism of report-based damage data. How did the Tropical Cyclone Florence impact the people communities? I decide not to use the WIOD database because its country sample is not very exposed to tropical cyclones. Figure 6 illustrates the cumulative point estimates of the past influence of tropical cyclone damage on the different sectoral growth variables.Footnote 22 The x-axis represents the lags of the damage variable, while the y-axis indicates the size of the cumulative coefficient \(\beta\) (in standard deviations). In general, a one standard deviation increase in tropical cyclone damage is associated with a decrease in the annual growth rate in the sector aggregate agriculture, hunting, forestry, and fishing of \(-\,2.62\) percentage points. \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. 2632). www.emdat.be, Haimes YY, Jiang P (2001) Leontief-based model of risk in complex interconnected infrastructures. Before 2000, only decadal data are available. Rev Environ Econ Policy 13(2):167188, Bulte E, Xu L, Zhang X (2018) Post-disaster aid and development of the manufacturing sector: lessons from a natural experiment in China. In contrast to this, the no recovery hypothesis states that natural disasters can lead to a permanent decrease of the income level without the prospect of reaching the pre-disaster growth path again.Footnote 1 This could result from a situation where recovery measures are not effectively implemented or where various negative income effects accumulate over time (Hsiang and Jina 2014; Onuma etal. 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. Out of 49 parameter estimates, only 12 are significantly different from zero.Footnote 26 As expected, the heavily damaged agriculture, hunting, forestry, and fishing sector aggregate experiences the most changes. Best track data are a postseason reanalysis from different available data sources, including satellites, ships, aviation, and surface measurements, that are used to describe the position and intensity of tropical cyclones (Kruk etal. World Dev 105:231247, Bertinelli L, Strobl E (2013) Quantifying the local economic growth impact of hurricane strikes: an analysis from outer space for the Caribbean. Excellent proofreading was provided by Jamie Parsons and Harrison Bardwell. Originating from a tropical wave over West Africa, Florence quickly organized upon its emergence over the Atlantic Ocean. Econ Syst Res 25(1):2049, Lenzen M, Malik A, Kenway S, Daniels P, Lam KL, Geschke A (2019) Economic damage and spillovers from a tropical cyclone. It asks for less input from the wholesale, retail trade, restaurants, hotels and mining and utilities sector aggregates, which results from a supply shock in the agricultural sector. 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. 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. As demonstrated in Fig. High levels of moisture in the air and low wind sheer formed showers and thunderstorms. It comprises the logged per capita value added of the respective sector j to simulate a dynamic panel model, the population growth rate, a variable for openness (i.e., imports plus exports divided by GDP), and the growth rate of gross capital formation.Footnote 18 Including these socioeconomic control variables introduce some threats to causal inference. J Econ Lit 52(3):740798, Dupor B (1999) Aggregation and irrelevance in multi-sector models. Tropical Cyclone Eloise, which hit southeastern Africa in January 2021, caused widespread flooding and landslides, resulting in at least 21 deaths and. In addition, in a recent working paper, Hsiang and Jina (2014) even demonstrate a long-term negative impact of tropical cyclones of up to 20 years. Mohan (2017) provides further evidence that in Caribbean countries agricultural crops are more severely affected by hurricanes compared to livestock. 2012), recent empirical studies focus on the shock propagation in production networks within the United States of America (Barrot & Sauvagnat 2016) or after single natural disasters, such as the 2011 earthquake in Japan (Boehm etal. 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. To the best of my knowledge, this is the first paper that analyzes global sectoral interactions after the occurrence of a tropical cyclone. The analysis of the past influences of tropical cyclone damage demonstrates that the sectoral growth response following a tropical cyclone is a complex undertaking. The most interesting changes can be observed within the single sectors of the manufacturing (D) 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. All weights are available in the HYDE 3.2 data set (Klein Goldewijk etal. 2015). Open Access funding enabled and organized by Projekt DEAL. About how did tropical cyclone eloise impact the economy. Further losses can occur if business continuity is lost through disrupted supply of intermediate inputs from, or distribution to, other businesses. The results of the InputOutput analysis, summarized in Appendix A.6.2, are a little less robust. WMO continues to monitor the "remarkable" tropical storm, which has cut a destructive path across . 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. Environ Res Lett 13(7):074034. Eur Econ Rev 101:441458, Chhibber A, Laajaj R (2008) Disasters, climate change and economic development in Sub-Saharan Africa: lessons and directions. This allows me to analyze whether any key sectors exist that, if damaged, result in direct damage of other sectors. In subsequent years, tropical cyclones negatively affect the majority of all sectors. How did the tropical cyclone impact the people communities? Kunze, S. Unraveling the Effects of Tropical Cyclones on Economic Sectors Worldwide: Direct and Indirect Impacts. Winds have lessened to 45 mph. 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. Effects of tropical cyclone damage on sectoral GDP growth compared to sample average. 6. Mon Weather Rev 142(10):38813899, Sieg T, Schinko T, Vogel K, Mechler R, Merz B, Kreibich H (2019) Integrated assessment of short-term direct and indirect economic flood impacts including uncertainty quantification. The storm was named by the Australian Bureau of Meteorology on 4 February and and finally came to an end on 14 March. 2. He finds a negative effect for the ISIC sectors agriculture, hunting, forestry, and fishing (A&B), mining, and utilities (C&E), wholesale, retail trade, restaurants, and hotels (GH), but a positive effect for the construction sector (F). Tropical cyclones are immensely powerful and can travel up to speeds of 65 km/h. They can best be summarized by three possible hypotheses: recovery to trend, build-back-better, and no recovery (Chhibber and Laajaj 2008). Possible reasons for these indirect effects, could be changes in fishing patterns in response to tropical cyclones (Bacheler etal. What impact do cyclones have on the economy? | how did tropical cyclone Stata J 17(3):630651, Holland GJ (1980) An analytic model of the wind and pressure profiles in hurricanes. The sectoral GDP data originates from the United Nations Statistical Division (UNSD) (United Nations Statistical Division 2015b). 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. Am Econ J Appl Econ 8(2):123153, Guha-Sapir D, CRED (2020) EM-DAT: the emergency events database. 2008; Mendelsohn etal. However, these growth rates are simply not high enough to reach the pre-disaster growth path. What is the Impact of Coriolis Force and Latent Heat on the.. (2018). 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. Notes InputOutput coefficients show how much input one sector needs to produce one unit of output. For the dynamic analysis, the panel length is 65years, and for the InputOutput regression, it comprises 20years. Together with further control variables, Table 2 in Appendix A.4 lists the exact definition of all variables used. (2012) demonstrate that only the agricultural sector is negatively affected. Concurrently, the construction sector demands significantly more input (1.84%) from the agriculture, hunting, forestry, and fishing sector. Other studies identify negative effects that are only significant in the short run but are insignificant in the long run (Strobl 2012; Bertinelli and Strobl 2013; Elliott etal. J Infrastruct Syst 7(1):112, Hallegatte S, Przyluski V (2010) The economics of natural disasters: concepts and methods. They are, however, aware of data problems, such as incomplete reports, fluctuating quality of the reports, and correlation with GDP. In detail, this model can be described by the following set of regression equations: where all variables are defined as in Eq. This exogenous measure allows me to identify an immediate negative growth effect of tropical cyclones for two out of seven sectoral aggregates including agriculture, hunting, forestry, and fishing and wholesale, retail trade, restaurants, and hotels. These opposing production changes may be one of the reasons why we can see no aggregate direct cost effects. Their destructiveness has three sources: damaging winds, storm surges, and heavy rainfalls. Econometrica 49(6):14171426, Noy I (2009) The macroeconomic consequences of disasters. 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 a single country study on floods in Germany, Sieg etal. For the Placebo test I have to forward the damage variable by two periods, since the damage in t index consists of the affected agricultural land/exposed population in \({t-1}\). These surges, sometimes called tidal waves, can drown people and animals, and are often the greatest killers in a cyclone. Sven Kunze. The analysis is conducted on a country-year level. For large weather systems, the circulation pattern is in a counterclockwise direction in the Northern Hemisphere and a clockwise direction in the Southern Hemisphere. 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. 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. PLoS ONE 14(4):121, Strobl E (2011) The economic growth impact of hurricanes: Evidence from U.S. coastal counties. Upon examining the underlying estimates in Tables 1213 in Appendix A.5, it is evident that the transport, storage, communication sectoral aggregate also turns negative, at least at the 90% confidence interval.Footnote 23. 2019) or the destruction of vessels. Energy Econ 46:576592, Kruk MC, Knapp KR, Levinson DH (2010) A technique for combining global tropical cyclone best track data. Additionally, it is unexplained how the sectors are interconnected and if their structural dependence changes. 2014). 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. As the manufacturing sectors are responsible for much of the counterbalancing of indirect effects, they should not be forgotten by the policymakers, even though they show no direct negative effects. (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. Rev Environ Econ Policy 7(2):181198, Aznar-Siguan G, Bresch DN (2019) CLIMADA v1: a global weather and climate risk assessment platform. Int J Disaster Risk Sci 10(2):166178, Munich R (2018) NatCatSERVICERelevant natural loss events worldwide 19802018. Google Scholar, Auffhammer M, Hsiang SM, Schlenker W, Sobel A (2013) Using weather data and climate model output in economic analyses of climate change. J Appl Meteorol Climatol 55(4):9931007, Boehm CE, Flaaen A, Pandalai-Nayar N (2019) Input linkages and the transmission of shocks: firm-level evidence from the 2011 Tohoku earthquake. Additionally, I cluster the standard errors at broader regional levels as a further robustness test. In total, I extend this research area in three ways: First, I introduce a new objective damage measure that allows for sector specific exposure of tropical cyclones. But those that do occur will be more intense and damaging. 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. Below is the link to the electronic supplementary material. Oscar A. Ishizawa, Juan Jos Miranda & Eric Strobl, Aiman Sana, Farzana Naheed Khan & Umaima Arif, Preeya S. Mohan, Nekeisha Spencer & Eric Strobl, Channing Arndt, Paul Chinowsky, James Thurlow, Jimena Alvarez, Dmitry Yumashev & Gail Whiteman, Environmental and Resource Economics In addition to damaging wind speed, salty sea spread and storm surge can cause salinization of the soil, leaving it useless for cultivation. 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.
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