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

Matteo Coronese, Francesco Lamperti, Klaus Keller, Francesca Chiaromonte, Andrea Roventini

Research output: Contribution to journalArticle

9 Scopus citations

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.

Original languageEnglish (US)
Pages (from-to)21450-21455
Number of pages6
JournalProceedings of the National Academy of Sciences of the United States of America
Volume116
Issue number43
DOIs
StatePublished - Oct 22 2019

All Science Journal Classification (ASJC) codes

  • General

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