Economic, human losses following environmental disasters

Mr. Antonio Aboitiz was kind enough to e-mail to me a very good paper titled “Destruction, Disinvestment, and Death: Economic and Human Losses Following Environmental Disaster” written by Jesse K. Anttila-Hughesy and Solomon M. Hsiang. The paper was dated Feb. 18 and is still under peer review but the importance of its findings and the immediate need for more information to guide our rehabilitation work in the areas devastated by Yolanda prods me to present the key points of the paper here.

In essence, the paper says that the immediate physical damage caused by environmental disasters are conspicuous and often the focus of media and government attention but that, in contrast, the nature and magnitude of post-disaster losses remain largely unknown because they are not easily observable.

These findings were made in the paper based on the annual variation in the incidence of typhoons (West-Pacific hurricanes) to identify post-disaster losses within Filipino households. The paper says that unearned income and excess infant mortality in the year after typhoon exposure outnumber immediate damage and death toll by a ratio of roughly 15-to-1 because typhoons destroy durable assets and depress incomes, leading to broad expenditure reductions achieved in part through disinvestment in health and human capital. It also says that infant mortality mirrors these economic responses, and additional findings—that only female infants are at risk, that sibling competition elevates risk, and that infants conceived after a typhoon are also at risk—indicate that this excess mortality results from household decisions made while coping with post-disaster economic conditions.

The paper estimates that the post typhoon economic deaths constitute 13 percent of the overall infant mortality rate in the Philippines and that, taken together, these results indicate that economic and human losses due to environmental disaster may be an order of magnitude larger than previously thought. As such, adaptive decision-making may amplify, rather than dampen disasters’ social cost.

And all these findings are based only on the kind of typhoons that we had so far endured in the past covered in the study. Thus, Aboitiz also gave this warning in his e-mail to me: “I believe though, that some caution is required in applying its estimations to the effects of Yolanda, as Yolanda is such an outlier (strength and path) that the predictive output of this study when applied to Yolanda may underestimate its effects. The addition of the storm surge effect on Eastern Leyte, with its enormous toll in lives and destruction, also confounds applicability.”

In summary, the paper has shown that the typhoon climate of the Western Pacific imposes major economic and human costs on Filipino households. It observes this impact directly in the form of lost physical assets; measure its economic effect of depressing household income and reducing consumption and human capital investments; and shows evidence that disinvestment has irreversible consequences, which the writers demonstrate by examining infant mortality.

Specifically, for example, the paper finds that on average, typhoons reduce household income by 6.6 percent and household expenditures by 7.1 percent and that total food expenditure declines similarly (5.9 percent) but larger declines appear in critical human capital investments such as meat (12.5 percent), education (13.3 percent) and medical (14.3 percent) expenditures. Another specific finding is that typhoons, and the disinvestment in human capital which they cause, elevate female infant mortality by 18.1 deaths per 1,000 live births and that in aggregate which corresponds to roughly 11,300 additional deaths per year, constituting 13 percent of the overall.

For economic development, therefore, the paper implies that typhoons destroy existing capital and reduce investments in new capital and that both of these effects are a concern for economic development. Citing other studies, the paper also says that climatic conditions that interfere with capital accumulation and economic growth are particularly pernicious because their effects are compounded over time. It adds that the repeated exposure of populations to tropical cyclones, both in the Philippines and elsewhere, probably slows the accumulation of capital stocks at the household level. The paper decries, however, the fact that such long run effects are difficult to identify empirically because cross-sectional variations in cyclone climates are correlated with unobservable omitted variables and expresses hope that future research will address this challenge.

Given its findings and in conjunction with the findings of other studies, the paper recommends that tropical cyclones should now be added to the list of geographically-varying factors which may contribute to spatial patterns in global economic development.

Now it is interesting to see what the paper says of the implication of its findings to Climate Change. One thing it says, again in conjunction with other studies, is that the frequency with which typhoons impact the Philippines suggests that households must understand and incorporate typhoon risk into their economic decisions. The paper interprets its estimates as conditional on households having already exploited the full range of adaptive behaviors available to them. With this condition, the paper says that the fact that we continue to observe large typhoon impacts in one of the world’s most intense typhoon climates, where populations have already adapted optimally, suggests that adaptation costs are so high that the people are better off ensuring typhoon losses rather than investing in additional adaptation. Here, the paper admits this has unsettling implications for future climate change policy.

Sorry if I do not have enough space here to detail the findings of the study and their implications. Those interested may go to this link: https://ssrn.com/abstract=2220501.