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how did the tropical cyclone impact the economy of florence

    how did the tropical cyclone impact the economy of florence

    Circle diameter is proportional to the average sectoral share on total GDP. Hence, I interpolate the data to generate yearly observations. 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. 2013), I control for the mean temperature and precipitation of a country in further specifications. \(Damage_{i,t}\) is the derived damage function for country i at year t from Eq. 0.1\(^{\circ }\) corresponds to approximately 10km at the equator. While some studies provide evidence of only a short-term economic impact of tropical cyclones (Bertinelli and Strobl 2013; Elliott etal. How did the tropical cyclone impact the people communities? In total, the majority of all sectoral aggregates experience lagged negative growth effects due to tropical cyclones. 4 displays the average InputOutput coefficients for all countries for all available years (19902015). 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. Additionally, it is unexplained how the sectors are interconnected and if their structural dependence changes. How do tropical storms affect people and the environment? Open Access This article is licensed under a Creative Commons Attribution 4.0 International License, which permits use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons licence, and indicate if changes were made. They are responsible for a demand shock in the mining and quarrying sectoral aggregate, leading to delayed negative growth effects being persistent over 10years. (Color figure online). I show point coefficient estimates as well as accumulated effects and error statistics calculated via a linear combination of the lagged \(\beta _{t-L}\) coefficients.Footnote 17. 912, while Tables 511 show the regression results. They can best be summarized by three possible hypotheses: recovery to trend, build-back-better, and no recovery (Chhibber and Laajaj 2008). While the distribution reveals that on average, geographically smaller countries, such as Hong Kong, Dominica or Jamaica, have a higher damage, there exists a difference between both damage measures, even for the highly exposed countries. In contrast to Eq. Nearly 2 million people have died globally due to tropical cyclones. Pictured: The East Coast of the U.S. and the Gulf of Mexico viewed by satellite as Hurricane Florence made landfall on September 14. 2008), and for a cross-section of 153 countries (Toya & Skidmore 2007). I also explore the effects on the 26 individual sectors later in this paper. The seventh tropical depression, fifth named storm and the second . 2019). It is evident from this analysis that many potential production changes are canceled out because of counteracting indirect effects. The underlying estimations can be found in Tables 1420 in Appendix A.5. 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). 2019). Acemoglu D, Carvalho VM, Ozdaglar A, Tahbaz-Salehi A (2012) The network origins of aggregate fluctuations. The dynamic analysis reveals that past tropical cyclones have a negative influence on the majority of sectors providing evidence for the no recovery hypothesis discussed in the literature. To underpin the causal identification, I conduct a falsification test, where I introduce leads instead of lags of the Damage variable, as well as a Fisher randomization test. 2014) remain. Fifteen thousand people were housed in temporary shelters in North Carolina. The individual colors represent different wind speed intensities. For example, Miranda etal. 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. This allows me to identify which of the competing hypothesesbuild-back-better, recovery to trend, or no recoveryis appropriate for which sector. First, tropical cyclones frequently cause a surge in ocean waters causing sea . 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. Freddy has finally been declared over by the French Meteorological service. An exception forms the mean damage robustness test for the wholesale, retail trade, restaurants, and hotels sectors, where the coefficient turns slightly insignificant (\(p=0.12\)). Panel (a) displays the percentage of agricultural land, whereas (b) shows the distribution of population in Australia in 2008. The result offers a better understanding of the finding of Hsiang & Jina (2014), who show that tropical cyclones have long-lasting negative impacts on GDP growth by demonstrating which sectors are responsible for the long-lasting GDP downturn that they identify. This study aims to better understand the sectoral impacts of tropical cyclones by looking at the direct and indirect effects in a large data set covering 205 countries from 1970 to 2015. Across the Caribbean the economic costs of tropical cyclones amount to 2% of GDP annually since the 1950. This behavior most likely speaks for an enduring risk adjustment of tourists. Despite having the largest negative shock, destroyed capital is relatively quickly replaced. There are two important points to note about this tropical cyclone damage variable. Nat Hazards Earth Syst Sci 19(1):137151, Loayza NV, Olaberra E, Rigolini J, Christiaensen L (2012) Natural disasters and growth: going beyond the averages. These results are line with previous empirical studies. 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. \end{array}\right. } 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). Additionally, tropical cyclone intensity is measured by remote sensing methods and other meteorological measurements. Tropical Cyclone Freddy - which is threatening communities in Madagascar and Mozambique for a second time in as many weeks - could become the longest-lasting storm of its kind on record, the World Meteorological Office (WMO) said on Tuesday. 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). Originating from a tropical wave over West Africa, Florence quickly organized upon its emergence over the Atlantic Ocean. NBER Working Paper 20352. http://www.nber.org/papers/w20352.pdf, Islam N (1995) Growth empirics: a panel data approach. I decide not to use the WIOD database because its country sample is not very exposed to tropical cyclones. Figure 8 reveals some patterns that are not visible on the aggregate level. To the best of my knowledge, this is the first paper that analyzes global sectoral interactions after the occurrence of a tropical cyclone. Figure 6 demonstrates that three out of seven sectoral aggregates suffer from delayed negative impacts of tropical cyclones. 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. If the official data of the countries or regions are not available, the UNSD consults additional data sources. Given the different theoretical possibilities, it is not surprising that the empirically identified effects are rather ambiguous. 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. 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 The colored areas depict all significant coefficients between the sectors, with negative coefficients in red and positive in green. 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. 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). 4. Econ Disasters Clim Change 4(3):657698, Mohan P (2017) Impact of hurricanes on agriculture: Evidence from the Caribbean. Mohan (2017) provides further evidence that in Caribbean countries agricultural crops are more severely affected by hurricanes compared to livestock. The second most indirectly affected sector is the construction sector. This finding clearly opposes the build-back-better hypothesis as well as the recovery to trend hypothesis. (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. However, these growth rates are simply not high enough to reach the pre-disaster growth path. The impact of cyclones can be extremely devastating, both in terms of loss of life and damage to infrastructure. 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. To underline the credibility of my regression analyses, I test the sensitivity of my results in various ways. The impact of weather on economic growth and its production factors, Climate change and developing country growth: the cases of Malawi, Mozambique, and Zambia, A framework for assessing the economic impacts of Arctic change, https://github.com/davidnbresch/climada/blob/master/docs/climada_manual.pdf, https://www.munichre.com/en/solutions/for-industry-clients/natcatservice.html, https://ideas.repec.org/c/boc/bocode/s352601.html, http://www.nhc.noaa.gov/verification/verify5.shtml, https://unstats.un.org/unsd/snaama/Metadata/Glossary#, https://unstats.un.org/unsd/snaama/assets/pdf/methodology.pdf, http://data.un.org/Explorer.aspx?d=SNAAMA, http://creativecommons.org/licenses/by/4.0/. A one standard deviation strong event has a probability of 8.9% among events above zero for agricultural damage and 8% for population damage.Footnote 16, Heatmap of InputOutput coefficient averages, 19902015. [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. The outcomes of this study can serve as a guide for local governments and international organizations to revise and refine their adaptation and mitigation strategies. (2019) find a build-back-better effect for plants that survived the 1995 Kobe earthquake and Mohan etal. Furthermore, only a minority of studies explicitly investigate the disasters influences on sectoral economic development. The individual point estimates are shown in Figs. It remains unclear if there exists some key sector, which, if damaged, results in a negative shock for the other sectors. Based on physical intensity data, Hsiang (2010) analyzes the effect of hurricanes on seven sectoral aggregates in a regional study for 26 Caribbean countries. 2019; Cole etal. J Urban Econ 88:5066, Elliott RJ, Liu Y, Strobl E, Tong M (2019) Estimating the direct and indirect impact of typhoons on plant performance: evidence from Chinese manufacturers. Wilmington remained cut off for at least a week following Hurricane Florence delaying the distribution of food, water and . A damage function that takes into account only the exposed population would underestimate the damage caused to the agricultural sector, given the large unpopulated but agriculturally used areas in the north and west of Australia. It . Resembling large whirlpools, they are made up of rotating, moist air, with wind speeds that can reach over 120 km/h. I also tested for lagged cumulative effects. Rev Econo Stat 101, Botzen WJW, Deschenes O, Sanders M (2019) The economic impacts of natural disasters: a review of models and empirical studies. It rather points to the presence of (delayed) negative effects of tropical cyclones from which the sectors cannot recover. 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. Tropical cyclones have the largest negative effect on the agriculture, hunting, forestry, and fishing aggregate compared to other sectoral aggregates. B.E. Florence was labeled a post-tropical cyclone at 5 a.m. on Tuesday, Sept. 18, according to the National Hurricane Center. Notes This figure shows the significant effects of a one standard deviation increase in tropical cyclone damage on the respective InputOutput coefficient. During 5 February, a tropical low was located south of Bali, Indonesia. Direct impacts on commercial property and infrastructure can lead to production shortfalls. Agricultural land and population count in Australia, 2008. It demands more input from three other sector aggregates, while the manufacturing sectors use less input from it. The number in parentheses compares the coefficients to the sample average of the respective InputOutput coefficient (in %). Clim Change 114(3):745768, Ghosh A (1958) Input-output approach in an allocation system. Economica 25(97):5864, Grger A, Zylberberg Y (2016) Internal labor migration as a shock coping strategy: evidence from a typhoon. Storms that are strongest originate off the west coast of Africa because they have two weeks worth of warm water to build up over. 2632). In comparison, in my analysis, I take meteorological data as input which is exogenous to the political and economic situation, contains all existing tropical cyclones, and has no quality fluctuations. 1315 show the cumulative results for different lag lengths (5, 10, 15), and Tables 1315 exhibit the underlying estimations. In: Bobrowsky PT (ed) Encyclopedia of natural hazards. Cumulative lagged influence of tropical cyclone damage on sectoral GDP growth (20years). 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. From a theoretical perspective, a natural disaster can have both positive and negative effects. Loayza etal. Sci Rep 9(1):20452322. Technical report, Centre for Environmental Data Analysis (CEDA), World Bank (2010) Natural hazards, unnatural disasters: the economics of effective prevention: overview. 2013). \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. So unfortunately, WA can expect regular cyclone impacts even as the climate . 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. 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. To allow for the possibility of multiple tropical cyclones per year and country, I conduct two robustness tests. It would be tedious to show \(26\,\times \,26\) regression models, Fig. 6. Kunze, S. Unraveling the Effects of Tropical Cyclones on Economic Sectors Worldwide: Direct and Indirect Impacts. (2012) use data from EM-DAT as main input for their explanatory variables. 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. This suggests that the production chains of the economy are only slightly disrupted by tropical storms, and indirect impacts are thus negligible. The storm was named by the Australian Bureau of Meteorology on 4 February and and finally came to an end on 14 March. In the years following a tropical cyclone, the majority of sectors experience negative growth effects. Second, only the maximum wind speed per grid cell and year is used for the calculation of the tropical cyclone damage. However, on average, the previously found effects can be replicated for 12 out of the 15 robustness tests.Footnote 35 Given the reduced quality of the data and a shorter time span (20years), the InputOutput analysis still offers solid results. 2008; Mendelsohn etal. First, I add to the research area on the macroeconomic effects of disasters. This paper contributes to two strands of the literature. 2016). 2019). For example, Hsiang (2010) finds an immediate positive response of the construction sector. Hurricane Florence reached its maximum wind speed of 130 knots (category 4 hurricane) on 11 September and made landfall on 14 September in North Carolina. Notes InputOutput coefficients show how much input one sector needs to produce one unit of output. 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 start of the arrow shows the input, and the end denotes the respective output. Evidence from developing countries. Bull Am Meteorol Soc 101(3):E303E322, Korty R (2013) Hurricane (typhoon, cyclone). 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. I am grateful for comments made by Axel Dreher, Vera Eichenauer, Andreas Fuchs, Lennart Kaplan, Eric Strobl, and Christina Vonnahme. www.emdat.be, Haimes YY, Jiang P (2001) Leontief-based model of risk in complex interconnected infrastructures. Econ J 122(559):6491, Dell M, Jones BF, Olken BA (2014) What do we learn from the weather? 2023 Springer Nature Switzerland AG. Read the InFocus blog post on climate change and flooding Impacts of tropical storms Buildings and bridges can be destroyed, people can get into difficulties in the water, and roads and railways can become damaged. https://unstats.un.org/unsd/snaama/Metadata/Glossary#, United Nations Statistical Division (2015b) Methodology for the national accounts main aggregates database. For the sample average (0.88) of the regression of Column (1), this effect can be translated into a decrease of \(-298\)%, as displayed in Fig. Originally a low-pressure system north of the Gulf of Carpentaria, Ingrid moved eastward and developed into a tropical cyclone in the Coral Sea on 6 March 2005. 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. The sample is larger than the maximum size of recognized sovereign states as it also includes quasi-autonomous countries such as the Marshall Islands, if data are provided for them by the UNSD. 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. In coastal areas, storm surges can lead to flooding, the destruction of infrastructures and buildings, the erosion of shorelines, and the salinization of the vegetation (Terry 2007; Le Cozannet etal. This allows me to analyze whether any key sectors exist that, if damaged, result in direct damage of other sectors. However, it has been demonstrated that this bias can be neglected if the panel is longer than 15 time periods (Dell etal. Ten mass-feeding kitchens were set up. Surprisingly, the sector aggregate mining and utilities turns negative three years after the tropical cyclone has hit the country. Econometrica 49(6):14171426, Noy I (2009) The macroeconomic consequences of disasters. 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. They ask significantly less input from other sector aggregates, while, at the same time, sectors from other aggregates ask more input from the manufacturing sectors. One reason could be that the destruction of productive capital outweighs the higher number of orders. Nevertheless, we can learn from this analysis the important role of those manufacturing sectors that are not directly affected. 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. J Dev Econ 97(1):130141, Terry JP (2007) Tropical cyclones: climatology and impacts in the South Pacific. I also checked for different lag lengths, but could hardly find any effect above a lag length of five years. Circle diameters represent the average proportional share on total GDP ranging from 32% (other activities), over 12% (manufacturing) to 6% (construction).Footnote 25. To demonstrate the average intersectoral connections within my sample, Fig. 2012, 2013). The coefficients show the increase of the respective damage variable by one standard deviation. This assumption is relaxed in further specifications by allowing more flexible country-specific trends (e.g., squared). The most interesting changes can be observed within the single sectors of the manufacturing (D) aggregate. For example, Loayza etal. volume78,pages 545569 (2021)Cite this article. 5. The South Pacific has recently been hit by particularly destructive cyclones like Winston and Pam. 2 contains a description of the data source, introduces the construction of the tropical cyclone damage measure, and presents descriptive statistics. 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. (2019) show that indirect impacts are nearly as high as direct impacts. The error term \(\epsilon _{i,t}\) is clustered at the country level. Am Econ J Appl Econ 8(2):123153, Guha-Sapir D, CRED (2020) EM-DAT: the emergency events database. 4 and 6 with the population weighted damage for the agricultural sectoral aggregate. Cyclone Eloise. 2014). (2012) investigate the effect of natural disasters on three sectors (agriculture, manufacturing, service) in a global sample for the period 19612005. Further losses can occur if business continuity is lost through disrupted supply of intermediate inputs from, or distribution to, other businesses. J Dev Econ 111:92106, Fetzer T (2020) Can workfare programs moderate conflict? However, an area weight has the disadvantage of including largely unpopulated areas, such as deserts, which are economically meaningless. 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 wind speed drops with distance to the center of the hurricane and as soon as it makes landfall. However, as an additional robustness test, I also show a regression where I include these outliers and the results remain unchanged. Hsiang (2010) also finds a negative effect of hurricanes for this sectoral aggregate for the Caribbean countries, whereas Loayza etal. Driven by climate change, at least in some ocean basins (Elsner etal. J Econ Geogra 20(3):857877, NHC (2016) National hurricane center forecast verification. 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.

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