J Econ Geogr 19(2):373408, Cuaresma JC, Hlouskova J, Obersteiner M (2008) Natural disasters as creative destruction? 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. 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. Economic impact of Hurricane Florence set to devastate US east coast It claimed overall more than 50 deaths. 4. These empirical studies all share that they use firm-level data to draw conclusions on upstream and downstream production disruptions. Direct impacts on commercial property and infrastructure can lead to production shortfalls. Hurricane Florence's Economic Damage on Carolinas, Virginia, and US https://doi.org/10.1007/s10640-021-00541-5, DOI: https://doi.org/10.1007/s10640-021-00541-5. Econ Syst Res 29(3):452461, Ouattara B, Strobl E (2013) The fiscal implications of hurricane strikes in the Caribbean. Environ Sci Technol 46(15):83748381, Lenzen M, Moran D, Kanemoto K, Geschke A (2013) Building Eora: a global multi-region input-output database at high country and sector resolution. I follow Emanuel (2011) by including the cube of wind speed above a cut-off wind speed of 92 km/h. An exception forms the mean damage robustness test for the wholesale, retail trade, restaurants, and hotels sectors, where the coefficient turns slightly insignificant (\(p=0.12\)). If the official data of the countries or regions are not available, the UNSD consults additional data sources. 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. 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. 2013), I control for the mean temperature and precipitation of a country in further specifications. Hurricane Florence - Wikipedia Tropical cyclones are immensely powerful and can travel up to speeds of 65 km/h. Below is the link to the electronic supplementary material. The growth literature predicts that some potential positive or negative impacts of natural disasters emerge only after a few years. Unraveling the Effects of Tropical Cyclones on Economic Sectors The results indicate that the policies should focus on the direct costs of tropical cyclones. 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. [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. Global warming has 'changed' spread of tropical cyclones around the world First, tropical cyclones frequently cause a surge in ocean waters causing sea levels to rise above normal. Flooding could prove devastating. The different colors represent different average coefficients, ranging from 0 (light purple) to 0.24 (dark purple). What impact do cyclones have on the economy? | how did tropical cyclone 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. 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. 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. For example, Loayza etal. The robustness tests that frequently fail are those with Conley-HAC and NeweyWest standard errors. In detail, this model can be described by the following set of regression equations: where all variables are defined as in Eq. This is an improvement in comparison to Hsiang (2010) who only focuses on 26 Caribbean countries, which are highly exposed but only account for 11% of global GDP in 2015 (United Nations Statistical Division 2015c). The results of the InputOutput analysis, summarized in Appendix A.6.2, are a little less robust. A strong pressure gradient rapidly developed within the system as it headed west resulting in a category rating of 5 by 8 March. The tests are conducted with the STATA command parmest (Newson 1998). The remainder of this paper is structured as follows: Sect. I am grateful for comments made by Axel Dreher, Vera Eichenauer, Andreas Fuchs, Lennart Kaplan, Eric Strobl, and Christina Vonnahme. By calculating the annual sectoral GDP per capita growth rate, I lose the first year of observation of the panel. The procedure is hierarchical and reaches from other official governmental publications over publications from other international organizations to the usage of data from commercial providers (United Nations Statistical Division 2015b). The main causal identification stems from the occurrence of tropical cyclones, which are unpredictable in time and location (NHC 2016) and vary randomly within geographic regions (Dell etal. The most interesting changes can be observed within the single sectors of the manufacturing (D) aggregate. Excellent proofreading was provided by Jamie Parsons and Harrison Bardwell. Most worryingly, the majority of all sectors experience delayed negative effects underpinning how far away the international community remains from a build-back better or recovery to trend situation for tropical cyclone-affected economies. 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. Additionally, it has been shown, that low- and middle-income countries seem to be more vulnerable to the negative impacts of natural disasters than high-income countries (Felbermayr and Grschl 2014; Berlemann and Wenzel 2018). How did the Tropical Cyclone Florence impact the people communities? In contrast to Eq. It rather points to the presence of (delayed) negative effects of tropical cyclones from which the sectors cannot recover. Therefore, I propose a new spatial exposure weight for the agricultural sector, namely agricultural land, which consists of the sum of land used for grazing and crops in \(\hbox {km}^{2}\) per grid cell. Their destructiveness has three sources: damaging winds, storm surges, and heavy rainfalls. 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. Nature 455(7209):9295, Emanuel K (2011) Global warming effects on U.S. hurricane damage. For sectoral GDP effects, however, no such evidence exists so far. These results are line with previous empirical studies. Originating from a tropical wave over West Africa, Florence quickly organized upon its emergence over the Atlantic Ocean. Resembling large whirlpools, they are made up of rotating, moist air, with wind speeds that can reach over 120 km/h. Alfred-Weber-Institute for Economics, Heidelberg University, Bergheimerstrasse 58, Heidelberg, 69115, Germany, You can also search for this author in 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. Therefore, I include the mean level of temperature and precipitation as additional climate controls in a further specification. The weighted tropical cyclone damage variables are orthogonal to economic growth as well as the InputOutput coefficients, and the panel approach allows me to identify the causal effect. This finding clearly opposes the build-back-better hypothesis as well as the recovery to trend hypothesis. 2632). During 5 February, a tropical low was located south of Bali, Indonesia. Nevertheless, it unveils the importance of the manufacturing sectors, as already demonstrated by their strong intersectoral connection in Fig. How do cyclones affect the people and communities? Check it out | how For the sector aggregate wholesale, retail trade, restaurants, and hotels, a one standard deviation increase in tropical cyclone damage cause a decrease of \(-\,1.16\) percentage points of the annual per capita growth rate. Furthermore, I use a more specific damage function than Hsiang & Jina (2014) which takes account of different sectoral exposure. Table 1 presents the results of the main specification for each of the seven annual sectoral GDP per capita growth rates. 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. Tables 3 and 4 in Appendix A.5 show the main descriptive statistics for all variables used in this study. (2019) demonstrate that there exist a short-term productivity efficiency increase after damaging hurricanes in the Caribbean. PubMedGoogle Scholar. 2014). 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). 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). 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). Technical report, Universit catholique de Louvain (UCL). First, as shown by Nickell (1981), there is a systematic bias of panel regressions with a lagged dependent variable and fixed effects. It is therefore important to examine their effects over time (Felbermayr and Grschl 2014; Hsiang and Jina 2014). 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. At the same time, other sectors demand more from the manufacturing sectors, resulting in a zero aggregate negative effect for them. Figure 7 illustrates the connections of significant changes of the InputOutput coefficient together with the effect size relative to the sample average of the respective InputOutput coefficients in parentheses (in %) resulting from model 6. Hsiang (2010) also finds the largest negative effects of tropical cyclones for the agricultural sector aggregate, while Loayza etal. This large negative effect is not surprising. To analyze the effect of tropical cyclones in the longer run, I introduced lags of the tropical cyclone damage variable to the main specification 4. This behavior most likely speaks for an enduring risk adjustment of tourists. They show that there are nearly no lagged responses present. The arrows depict all significant coefficients between the sectoral aggregates, with negative coefficients in red and positive in green. Moreover, I include time fixed effects \(\delta _t\) to account for time trends and other events common to all countries in the sample. This study provides an explanation about which sectors contribute to an overall negative GDP-effect of tropical cyclones identified by previous studies (Noy 2009; Strobl 2012; Elliott etal. The damaging winds are responsible for serious destruction of buildings and vegetation. \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. Quick Answer: How Did Hurricane Florence Impact Public Health 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. Eastern North Carolina is prone to flooding associated with tropical cyclones (e.g., hurricanes Fran in 1996 and Matthew in 2016) and it is likely that an event similar to the Hurricane Florence . Google Scholar, Kousky C (2014) Informing climate adaptation: a review of the economic costs of natural disasters. The sample period hence reduces to 19712015. Sci Rep 9(1):20452322. 2016). For the agricultural sector, I use the fraction of exposed agricultural land, while for the remaining sectors, I use the gridded population. For storm surge damage this is not possible, since there exists no global data set so far. How Tropical Cyclone Eloise Impacted the Economy The main explanatory variable is a new damage measure for local tropical cyclone intensity based on meteorological data weighted for individual sectoral exposure, which is included in a panel analysis for a maximum of 205 countries over the 19702015 period. Given the different theoretical possibilities, it is not surprising that the empirically identified effects are rather ambiguous. B.E. www.emdat.be, Haimes YY, Jiang P (2001) Leontief-based model of risk in complex interconnected infrastructures. Agricultural land and population count in Australia, 2008. The analysis is conducted on a country-year level. Likewise, the contemporaneous, non-significant effect for the remaining sectors can be explained as a result of lower vulnerability and/or efficient recovery measures, which attenuate the potentially negative effect of tropical cyclones. Additionally, it is unexplained how the sectors are interconnected and if their structural dependence changes. This paper contributes to two strands of the literature. The red and green arrow colors represent significant negative and positive effects, whereas the color intensities denote different p-values. 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. Econ Disasters Clim Change 4(3):657698, Mohan P (2017) Impact of hurricanes on agriculture: Evidence from the Caribbean. Geosci Model Dev 12(7):30853097, Bacheler NN, Shertzer KW, Cheshire RT, MacMahan JH (2019) Tropical storms influence the movement behavior of a demersal oceanic fish species. J Atmos Ocean Technol 27(4):680692, Lazzaroni S, van Bergeijk P (2014) Natural disasters impact, factors of resilience and development: a meta-analysis of the macroeconomic literature. To allow for the possibility of multiple tropical cyclones per year and country, I conduct two robustness tests. Technical report, Centre for Environmental Data Analysis (CEDA), World Bank (2010) Natural hazards, unnatural disasters: the economics of effective prevention: overview. Possible reasons for these indirect effects, could be changes in fishing patterns in response to tropical cyclones (Bacheler etal. 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. PLoS ONE 14(4):121, Strobl E (2011) The economic growth impact of hurricanes: Evidence from U.S. coastal counties. The InputOutput analysis demonstrates that production processes are only slightly disturbed by tropical cyclones. (2012) use data from EM-DAT as main input for their explanatory variables. 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. J Appl Meteorol Climatol 52(8):16881697, Blanc E, Strobl E (2016) Assessing the impact of typhoons on rice production in the Philippines. 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. In further specifications, I include additional control variables \({\mathbf {Z}}_{i,t-1}\) to account for potential socioeconomic or climatic influences. Additionally, I allow for country-specific linear trends \(\mu _i*t\). It would be tedious to show \(26\,\times \,26\) regression models, Fig. For tropical cyclones, no empirical cross-country study on indirect effects exists so far. To be in line with the related growth literature, I estimate a further specification where I add a set of socioeconomic control variables (Islam 1995; Strobl 2012; Felbermayr and Grschl 2014). 912, while Tables 511 show the regression results. J Dev Econ 111:92106, Fetzer T (2020) Can workfare programs moderate conflict? In the years following a tropical cyclone, the majority of sectors experience negative growth effects. As climate change is warming ocean temperatures, there is potentially more of this fuel available. 2019). As Sect. http://hdl.handle.net/10986/2512, Yang D (2008) Coping with disaster: the impact of hurricanes on international financial flows, 19702002. 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. \end{array}\right. } 2632). Given that producers in modern economies are . 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. In the second test, I take the mean wind speed cubed \((S(mean)^3_{g,t})\) above 92 km/h per grid and year to calculate the \(damage_{i,t}\) (see Appendix Table 41 and Figs. Torrential rainfall can cause serious in-land flooding, thereby augmenting the risk coming from storm surges (Terry 2007). Tropical Cyclone Eloise was the strongest tropical cyclone to impact the country of Mozambique since Cyclone Kenneth in 2019 and the second of three consecutive tropical cyclones to impact Mozambique in the 2020-21 South-West Indian Ocean cyclone season. First, tropical cyclones frequently cause a surge in ocean waters causing sea . How did tropical cyclone Florence impact the economy? Stagnant water can cause the spread of disease, and transportation or communication infrastructure may have been destroyed, hampering clean-up and rescue efforts. Appendix A.3 provides a more detailed description of the composition of the individual ISIC categories. Q J Econ 131(3):15431592, Berlemann M, Wenzel D (2018) Hurricanes, economic growth and transmission channels: empirical evidence for countries on differing levels of development. Additionally, the GTAP database is not freely available and only covers a few years. Finally, the standard errors \(\epsilon _{i,t}\) could be biased by the autocorrelation of unobservable omitted variables (Hsiang 2016). 2014). They can best be summarized by three possible hypotheses: recovery to trend, build-back-better, and no recovery (Chhibber and Laajaj 2008). Based on damage estimates from EM-DAT, the authors find a negative effect for the agricultural and a positive effect for the industrial sector. The wind speed drops with distance to the center of the hurricane and as soon as it makes landfall. First, I only use the damage fraction due to maximum wind speed of tropical cyclones. I find a significantly negative influence of tropical cyclones on two sector aggregates including agriculture, as well as trade and tourism. 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. (2012) demonstrate that only the agricultural sector is negatively affected. Despite having the largest negative shock, destroyed capital is relatively quickly replaced. Sven Kunze. Storms that are strongest originate off the west coast of Africa because they have two weeks worth of warm water to build up over. The variables are measured in constant 2005 USD. InputOutput models that analyze indirect costs, such as the Inoperability Input-Ouptut model (Haimes and Jiang 2001) or the Ghosh model (Ghosh 1958), require many assumptions that tend to be problematic (Oosterhaven 2017). Part of Springer Nature. This importance for the sectoral composition was already demonstrated by Bulte etal. 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. 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.
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