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Impact of natural disasters on income inequality in Sri Lanka
Abstract
We explore the relationship between natural disasters and income inequality in Sri Lanka as the first study of this nature for the country. The analysis uses a unique panel data set constructed for the purpose of this paper. It contains district inequality measures based on household income reported in six waves of the Household Income and Expenditure Survey of Sri Lanka during the period between 1990 and 2013, data on disaster affected population and other economic and social indicators. Employing a panel fixed effects estimator, we find that contemporaneous natural disasters and their immediate lags significantly and substantially decrease inequality in per adult equivalent household income as measured by the Theil index. Findings are robust across various inequality metrics, sub-samples and alternative estimators such as Ordinary Least Squares and System GMM. However, natural disasters do not affect household expenditure inequality. Either households behave as if they have a permanent income or all households reduce their expenditure proportionately irrespective of their income level in responding to natural disasters. Natural disasters decrease non-seasonal agricultural and non-agricultural income inequality but increase seasonal agricultural income inequality. Income of richer households is mainly derived from non-agricultural sources such as manufacturing and business activities and non-seasonal agricultural activities. Poorer households have a higher share of agricultural income.
... The relationship between natural disasters and income inequality is mentioned by Cappelli and Consoli (2021), Keerthiratne andTol (2018), andPleninger (2022). Specifically, Cappelli and Consoli (2021) construct an integrated framework considering climate change, natural disasters, and inequality. ...
... The relationship between natural disasters and income inequality is mentioned by Cappelli and Consoli (2021), Keerthiratne andTol (2018), andPleninger (2022). Specifically, Cappelli and Consoli (2021) construct an integrated framework considering climate change, natural disasters, and inequality. ...
... Based on the panel dataset containing 149 countries during 1992-2018, they find that natural disasters cause a more serious impact on countries with higher levels of income inequality, which means that tackling natural disasters and inequality is of great significance as the disasters-inequality trap leads to a vicious cycle for sustainable development. Focusing on the situation in Sri Lanka, Keerthiratne and Tol (2018) find that natural disasters are influencing factors of income inequality, as they show that natural disasters enlarge the income inequality of seasonal agriculture. Moreover, low-income groups depend largely on seasonal agricultural while high-income groups have more business activities in the manufacture sector, which means that low-income groups suffer more from natural disasters. ...
This study explores the global impact of climate finance on wealth and income inequality, utilizing the IV-GMM model to capture nuanced relationships. Key findings indicate that climate finance effectively reduces both forms of inequality, benefiting low-income populations and suggesting it as a viable tool for inequality reduction. Notably, the impact of climate finance is asymmetric: countries with lower initial inequality levels experience more pronounced benefits, while the effect lessens as inequality increases. Additionally, climate risks-represented by natural disasters-worsen inequality, underscoring climate finance's dual role in directly reducing inequality and indirectly mitigating disaster impacts. These insights offer valuable policy implications, highlighting climate finance as a means to promote equity and alleviate poverty in the face of escalating climate challenges.
... Taking cyclone in Myanmar as a case study, Warr and Aung (2019) found that NDs lead to enlarged inequality within regions, and this finding is also confirmed by Rodriguez-Oreggia et al. (2013) who investigated how NDs lead to increased levels of poverty. While most studies mention that NDs cause adverse effects on inequality, Keerthiratne and Tol (2018) found that both current NDs and their immediate lagged effects significantly reduce inequality in household income. Specifically, they observed that NDs decrease nonseasonal agricultural and non-agricultural income inequality but increase seasonal agricultural income inequality. ...
... Our findings align with some existing literature, particularly in demonstrating that NDs exacerbate inequality (Bui et al., 2014;Cappelli et al., 2021), renewable energy consumption (Lee et al., 2021), and energy poverty (Okyere et al., 2023), and that the adverse impacts of NDs are more severe in under-developed regions and economies (Nath and Behera, 2011;Zhou et al., 2013). However, our findings are not consistent with the conclusions of Keerthiratne and Tol (2018), who explored the impact of NDs on household income inequality and found that NDs reduce nonseasonal agricultural and non-agricultural income inequality. The divergence between our findings and those of Keerthiratne and Tol (2018) can be attributed to the different dimensions of inequality examined in studies. ...
... However, our findings are not consistent with the conclusions of Keerthiratne and Tol (2018), who explored the impact of NDs on household income inequality and found that NDs reduce nonseasonal agricultural and non-agricultural income inequality. The divergence between our findings and those of Keerthiratne and Tol (2018) can be attributed to the different dimensions of inequality examined in studies. Keerthiratne and Tol's work focuses on income inequality, which can be temporarily mitigated by external aid and temporary income redistribution, potentially leading to a reduction in overall income disparities. ...
The detrimental impact of natural disasters on inequality is evident, yet their influence on the inequality of carbon emissions remains underexplored. Addressing this gap is crucial, as understanding the relationship between natural disasters and carbon inequality can inform more equitable climate policies. To this end, we performed an econometric investigation on the impact of natural disasters on carbon inequality, based on a global dataset covering 140 countries during 2000–2020. The system generalized method of moments model is utilized, and we also delve into the heterogeneous analysis, as well as the mediating and the moderating effects. Our numerical analysis yields four key findings. First, natural disasters are stumbling blocks to carbon inequality eradication, which means that natural disasters are not conducive to mitigating carbon inequality, but rather amplify it. Second, this adverse effect is more pronounced in low-income countries. Third, government ineffectiveness not only heightens carbon inequality but also intensifies the negative impact of natural disasters, demonstrating a synergic effect. Fourth, energy infrastructure and renewable energy development are two channels that link natural disasters with carbon inequality. These findings underscore the necessity of targeted policy interventions to mitigate carbon inequality and reduce the adverse consequences of natural disasters.
... This lack of temporal perspective can lead to omitted variable bias and severely limit causal inferences. Recognizing these limitations, many studies have turned to panel data, which observes the same units across multiple time points (Baez et al., 2020;Cappelli et al., 2021;Giesbert & Schindler, 2012;Keerthiratne & Tol, 2018;Rodriguez-Oreggia et al., 2013;Sedova et al., 2020;Sohnesen, 2020;Yamamura, 2015). Panel data allows researchers to track changes over time and explore the temporal dynamics of poverty and inequality; consequently, it also offers a more indepth understanding of the effects of climate change and natural disasters, which often have a longitudinal nature themselves. ...
... An alternative to household surveys is to use global disaster databases such as the Emergency Events Database (EM-DAT), which provides comprehensive data on the occurrence and impacts of over 22,000 mass disasters worldwide since 1900 (Cappelli et al., 2021;Yamamura, 2015). Another source of disaster data is DesInventar, which provides records of disasters at the country level from 1980 (Rodriguez-Oreggia et al., 2013;Keerthiratne & Tol, 2018). The advantage of such databases is their wide coverage and the standardization of disaster data, enabling cross-country comparisons. ...
... Some studies even highlight potential reductions in inequality following climate-related events. For example, Keerthiratne and Tol (2018) document a decrease in the Gini coefficient by 0.01 points in the aftermath of natural disasters in Sri Lanka. This reduction appears to be driven not by an increase in the income of poorer households, but rather by a decrease in the income of richer households. ...
We offer an updated and comprehensive review of recent studies on the impacts of climate change, particularly global warming, on poverty and inequality, paying special attention to data sources as well as empirical methods. While studies consistently find negative impacts of higher temperatures on poverty across different geographical regions, with higher vulnerability especially in poorer Sub‐Saharan Africa, there is inconclusive evidence on climate change impacts on inequality. Further analyzing a recently constructed global database at the subnational unit level derived from official national household income and consumption surveys, we find that temperature change has larger impacts in the short term and more impacts on chronic poverty than transient poverty. The results are robust to different model specifications and measures of chronic poverty and are more pronounced for poorer countries. Our findings offer relevant inputs into current efforts to fight climate change.
... Views on the impact of disasters on inequality are even more varied. Most empirical studies focus on a specific country or region and find, for example, an increase in income inequality in Vietnam (Bui et al. 2014) and Nepal (Bista 2020), decreases in Bangladesh (Abdullah et al. 2016), Sri Lanka (Keerthiratne and Tol 2018), and Myanmar (Warr and Aung 2019). On the other hand, some studies investigate the issue using cross-country panel data and conclude, for example, a short-term increase in income inequality that disappears over the long run (Yamamura 2015), negative relationships between disaster and income inequality in both the short and long run (Song et al. 2023), and the vicious cycle wherein countries with higher inequality have a larger number of people affected resulting in further larger inequality (Cappelli et al. 2021). ...
... Potential mechanisms are also pointed out. For example, disasters decrease inequality by destroying capital such as buildings and factories which are generally owned by the rich, and infrastructure, the destruction of which thus decreases the productivity of such capital (e.g., Abdullah et al. 2016;Scheidel 2017;Keerthiratne and Tol 2018;Warr and Aung 2019); disasters decrease inequality of non-agricultural income where wealthier households have a higher share (Keerthiratne and Tol 2018); institutional capacity is an essential factor explaining the link between disasters and distributional impact (Banerjee et al. 2010;Breckner et al. 2016); humanitarian aid and financial support by the international community after a disaster help explain the reduction in income inequality (Barone and Mocetti 2014), while such aids could result in moral hazard associated with an increase in inequality (Andor et al. 2020; Amarasiri de Silva 2009). Moreover, households at the bottom of the income distribution lack access to insurance coverage but cope with income shocks through employment of child labor, sale of productive goods (Sawada and Takasaki 2017), changes in both agricultural practices and diet, and out-migration of different length periods (De Waal 2005). ...
... Potential mechanisms are also pointed out. For example, disasters decrease inequality by destroying capital such as buildings and factories which are generally owned by the rich, and infrastructure, the destruction of which thus decreases the productivity of such capital (e.g., Abdullah et al. 2016;Scheidel 2017;Keerthiratne and Tol 2018;Warr and Aung 2019); disasters decrease inequality of non-agricultural income where wealthier households have a higher share (Keerthiratne and Tol 2018); institutional capacity is an essential factor explaining the link between disasters and distributional impact (Banerjee et al. 2010;Breckner et al. 2016); humanitarian aid and financial support by the international community after a disaster help explain the reduction in income inequality (Barone and Mocetti 2014), while such aids could result in moral hazard associated with an increase in inequality (Andor et al. 2020; Amarasiri de Silva 2009). Moreover, households at the bottom of the income distribution lack access to insurance coverage but cope with income shocks through employment of child labor, sale of productive goods (Sawada and Takasaki 2017), changes in both agricultural practices and diet, and out-migration of different length periods (De Waal 2005). ...
This study develops a dynamic model of climate-related disaster impacts, considering multidimensional household heterogeneity, for analyzing changes in growth and inequality in low-income countries. Focusing on human capital development, the study demonstrates the multiple impacts of disaster risk reduction (DRR) policies on human capital investment, including the effect of schooling opportunities for households constrained by the subsistence consumption constraint. Through numerical simulations performed for two economies that differ in terms of human capital, modeled after Madagascar and Fiji, it is illustrated that the possibilities of involuntary unemployment and the work-learning choice drive the diversity in macroeconomic impacts of a disaster. In an economy characterized by low levels of human capital, a disaster could cause an increase in labor supply in the immediate aftermath but interrupt human capital formation, impeding long-term growth and human capital formation. Such a result contradicts prevailing intuition by demonstrating that a disaster occurring in an economy under recession may not result in a large adverse GDP impact in the short run but may negatively impact growth in the long run. On such a path, a policy of development in DRR infrastructure with appropriate taxation could reduce human-capital gaps in the long run by supporting continued post-disaster human-capital-investment opportunities for the poor.
... Poverty makes people or societies vulnerable to the effects of climate change at various levels, from households (Jardine et al. 2020;Nakamura et al. 2017;Keerthiratne and Tol 2018) to countries (Mendelsohn et al. 2006;Ahmed et al. 2009;Diffenbaugh and Marshall 2019;Baarsch et al. 2020). For example, the economic loss from a heat wave was more severe for small vessels than it was for large vessels in California fisheries (Jardine et al. 2020). ...
... For example, the economic loss from a heat wave was more severe for small vessels than it was for large vessels in California fisheries (Jardine et al. 2020). Poor households, which have higher shares of incomes from agriculture, were more affected by natural disasters between 1990 and 2013 in Sri Lanka (Keerthiratne and Tol 2018). While vulnerabilities to climate extremes at the household level have been discussed, few studies have focused on economic structural changes (i.e., economic inequality) within a country, including the damage and recovery processes after climate extremes, due to data limitations. ...
... We detected expanding inequality after the winter disaster in 2009 in Mongolia, and the increased level of inequality remained 4 years after the disaster (Fig. 2). This finding is in contrast to a study in Sri Lanka that did not detect expansions of inequality among households after disasters from 1990-2013 (Keerthiratne and Tol 2018). Keerthiratne and Tol (2018) pointed out the presence of diverse occupations (e.g., agricultural production or non-agricultural production) in Sri Lanka and that may have mitigated the expansion of inequality after disasters. ...
The importance of ending poverty and reducing economic inequality has been explicitly recognized globally. Climate extremes are a critical global risk and can lead to economic damages, but empirical evidence of their effects on economic inequality is limited. Here, we focus on Mongolian pastoralism, which has a coupled socio-ecological system, to examine the trend of economic inequality among herders following a climate extreme event. Mongolia experienced a winter disaster in 2009 that caused a mortality of about 20% of the total number of livestock across the country. We used a long-term livestock panel dataset at the household level (n = 787) during 2004–2013 to examine changes in the economic distribution after the disaster. Economic inequality increased after the disaster (Gini coefficient increased from 0.46 to 0.61), and the increased level of inequality remained 4 years after the disaster. A decomposition of the inequality analysis showed that within-group inequality largely contributed to the greater total inequality, and household groups with a small number of livestock had the largest increase in inequality. Moreover, household groups that did not recover their livestock number had a higher loss rate of livestock during the disaster than household groups that did recover. Although the number of total livestock in the study area did recover after 4 years, we empirically showed that inequality among herders increased after the disaster. This result suggests that economic distributions are critical when examining the socio-economic impacts of climate extremes. We also suggest that preparing for disasters during normal years to alleviate loss of livestock during a disaster, especially for households with a small number of livestock, is a critical way to reduce poverty in the face of more frequent climate extremes.
... Views on the impact of disasters on inequality are even more varied. Most empirical studies focus on a specific country or region and find, for example, an increase in income inequality in Vietnam [23] and Nepal [24], decreases in Bangladesh [25], Sri Lanka [26], and Myanmar [27]. On the other hand, some studies investigate the issue using cross-country panel data and conclude, for example, a short-term increase in income inequality that disappears over the long run [28], negative relationships between disaster and income inequality in both the short and long run [29], and the vicious cycle wherein countries with higher inequality have a larger number of people affected resulting in further larger inequality [30]. ...
... Potential mechanisms are also pointed out. For example, disasters decrease inequality by destroying capital such as buildings and factories which are generally owned by the rich, and infrastructure, the destruction of which thus decreases the productivity of such capital [e.g., [25][26][27]31]; disasters decrease inequality of non-agricultural income where wealthier households have a higher share [26]; institutional capacity is an essential factor explaining the link between disasters and distributional impact [32,33]; humanitarian aid and financial support by the international community after a disaster help explain the reduction in income inequality [34], while such aids could result in moral hazard associated with an increase in inequality [35,36]. Moreover, households at the bottom of the income distribution lack access to insurance coverage but cope with income shocks by employment of child labor, sale of productive goods [37], changes in both agricultural practices and diet, and out-migration of different length periods [38]. ...
... Potential mechanisms are also pointed out. For example, disasters decrease inequality by destroying capital such as buildings and factories which are generally owned by the rich, and infrastructure, the destruction of which thus decreases the productivity of such capital [e.g., [25][26][27]31]; disasters decrease inequality of non-agricultural income where wealthier households have a higher share [26]; institutional capacity is an essential factor explaining the link between disasters and distributional impact [32,33]; humanitarian aid and financial support by the international community after a disaster help explain the reduction in income inequality [34], while such aids could result in moral hazard associated with an increase in inequality [35,36]. Moreover, households at the bottom of the income distribution lack access to insurance coverage but cope with income shocks by employment of child labor, sale of productive goods [37], changes in both agricultural practices and diet, and out-migration of different length periods [38]. ...
This study develops a dynamic model of climate-related disaster impacts, considering multidimensional household heterogeneity, for analyzing changes in growth and inequality in low-income countries. Focusing on human capital development, the study demonstrates the multiple impacts of disaster risk reduction (DRR) policies on human capital investment, including the effect of schooling opportunities for households constrained by the subsistence consumption constraint. Through numerical simulations performed for two economies that differ in terms of human capital, modeled after Madagascar and Fiji, it is illustrated that the possibilities of involuntary unemployment and the work-learning choice drive the diversity in macroeconomic impacts of a disaster. In an economy characterized by low levels of human capital, a disaster could cause an increase in labor supply in the immediate aftermath, but interrupt human capital formation, impeding long-term growth and human capital formation. Such a result contradicts prevailing intuition by demonstrating that a disaster occurring in an economy under recession may not result in a large adverse GDP impact in the short run but may negatively impact growth in the long run. On such a path, a policy of development in DRR infrastructure with appropriate taxation could reduce human-capital gaps in the long run by supporting continued post-disaster human-capital-investment opportunities for the poor.
... Existing studies investigate the impacts of natural disasters on household income distribution using country-specific household survey data (Bui et al., 2014;Abdullah et al., 2016;Feng et al., 2016;Keerthiratne and Tol, 2018;Warr and Aung, 2019). However, the results vary across these studies, and no conclusion can be drawn. ...
... For example, while examining the effect of natural disasters on household income, expenditure, poverty, and inequality using Vietnam's 2008 Household Living Standard Survey, Bui et al. (2014), find that natural disasters cause high economic costs and worsen poverty and inequality. On the contrary, Abdullah et al. (2016), Keerthiratne and Tol (2018), and ...
... Previous studies (Abdullah et al., 2016;Scheidel, 2017;Keerthiratne and Tol, 2018;Warr and Aung, 2019), along with our analysis, reveal that natural disasters destroy infrastructures and capital assets, which are generally owned by the rich. Some other factors like institutional quality, financial aid, and political revolutions are useful in understanding the distributional effect of natural disasters. ...
... In other words, researchers argue that natural hazards can cause significant destruction, even in well-established economies such as Indonesia and India (Barbhuiya & Chatterjee, 2020). Empirical studies further support this notion, demonstrating that natural disasters can increase poverty levels in affected countries (Awasthi, 2019;Bui et al., 2014), exacerbate inequality (Keerthiratne, 2018), and impact national energy consumption (Doytch & Klein, 2018;Lee et al., 2021). 162 Y. Rahmawati et al. ...
... However, it is important to consider that certain types of natural disasters may not necessarily result in fatalities but can still inflict significant suffering on affected populations, as is the case with drought. In order to account for such events, this study adopts the measure of the number of affected people, consistent with previous literature (Hallegatte et al., 2020;Keerthiratne, 2018). The term "affected people" encompasses both deaths and individuals who have been affected by any type of natural disaster, such as floods, droughts, landslides, volcanic eruptions, tsunamis, and others. ...
The present research aims to address the empirical gap in understanding the impact of natural disasters on renewable energy consumption, specifically examining the role of foreign direct investment (FDI) and infrastructure. Panel data from 27 selected countries in Asia is utilized to explore the relationship between these variables using a two-step Generalized Method of Moments (GMM) approach. The dataset spans the period from 2010 to 2020, and secondary data from the World Bank and the Center for Research on the Epidemiology of Disasters (CRED) is employed. The study considers renewable energy consumption as the dependent variable, with lagged renewable energy, affected people, and infrastructure serving as independent variables. Additionally, gross domestic product per capita (GDPP) is included as a control variable to enhance data robustness. The findings of the research can be summarized in three main points. Firstly, the lagged renewable energy variable exhibits a positive and significant effect on renewable energy consumption. This suggests that the previous year’s renewable energy levels have a considerable influence on the subsequent year’s consumption, indicating the persistence of renewable energy usage. Secondly, an increase in infrastructure is found to have a statistically significant impact on renewable energy consumption in the selected Asian countries. This highlights the importance of developing and improving sustainable infrastructure to support the growth of renewable energy sectors. Lastly, the unexpected negative relationship between GDPP and renewable energy consumption suggests that middle-income countries may face challenges in adopting renewable energy due to insufficient technological advancements and infrastructure.
... (Mottaleb et al., 2013;Bui et al., 2014;Keerthiratne and Tol, 2018;Moniruzzaman, 2019;Salvucci and Santos, 2020 (Hyun and Kim, 2018;Choi et al., 2019;Kim, Jung, et al., 2021;Fiscal Power Index (FPI) Base damage amount (won) Regions with an average FPI of less than 0.1 1.8 billion Regions with an average FPI of 0.1 or more and less than 0.2 2.4 billion Regions with an average FPI of 0.2 or more and less than 0.4 3.0 billion Regions with an average FPI of 0.4 or more and less than 0.6 3.6 billion Regions with an average FPI of 0.6 or higher 4.2 billion * FPI is calculated in the last three years (2)-(3)과 같다. (Bui et al., 2014;Keerthiratne and Tol, 2018;Salvucci and Santos, 2020 (1) (2) (3) 는 t시기에서의 가구 i의 종속변수를 나타내며, 는가구 i의 처치집단 더미변수를 의미하고, 는 t시점에서의 재난 발생 더미변수를 나타낸다. ...
... Fiscal Power Index (FPI) Base damage amount (won) Regions with an average FPI of less than 0.1 1.8 billion Regions with an average FPI of 0.1 or more and less than 0.2 2.4 billion Regions with an average FPI of 0.2 or more and less than 0.4 3.0 billion Regions with an average FPI of 0.4 or more and less than 0.6 3.6 billion Regions with an average FPI of 0.6 or higher 4.2 billion * FPI is calculated in the last three years (2)-(3)과 같다. (Bui et al., 2014;Keerthiratne and Tol, 2018;Salvucci and Santos, 2020 ...
This study investigates the impact of the 2012 typhoon on household consumption expenditures in South Korea using a difference-indifferences model. We analyzed the changes in household consumption expenditures based on the extent and severity of disaster damage. Additionally, how these impacts vary depending on the employment status of the household head and the household's income quartile was explored. The findings indicate that households experiencing disaster damage tend to reduce their consumption expenditures compared to unaffected households. Notably, households in the lowest income quintile and those with heads engaged in temporary or self-employment experience more significant declines. These research findings provide valuable insights for shaping future policies aimed at supporting household recovery and effectively directing post-disaster assistance resources.
... By contrast, Abdullah et al. [25] show that income inequality decreased following Cyclone Aila in the Sundarbans region in Bangladesh in 2009. Similarly, Keerthiratne and Tol [26] also find that natural disasters significantly decrease household income inequality as measured by the Theil index in Sri Lanka. A recent study by Pleninger [27] concludes that natural disasters primarily affect middle incomes, which translates into non-existent effects on inequality measures. ...
... When considering deaths and people affected, the latter is preferred as severe disasters may not necessarily result in high death rates [33,34]. Keerthiratne and Tol [26] stated that the economic data may be collected by local individuals who may have biased perspectives, making it an inappropriate measure for assessing natural disasters. Hence, in this study, we choose to focus on the proportion of people affected by natural disasters as our variable of interest. ...
Natural disasters have been demonstrated to cause devastating effects on economic and social development in China, but little is known about the relationship between natural disasters and income at the household level. This study explores the impact of natural disasters on household income, expenditure, and inequality in China as the first study of this nature for the country. The empirical analysis is conducted based on a unique panel dataset that contains six waves of the Chinese Household Income Project (CHIP) survey data over the 1988–2018 period, data on natural disasters, and other social and economic status of households. By employing the fixed effects models, we find that disasters increase contemporaneous levels of income inequality, and disasters that occurred in the previous year significantly increase expenditure inequality. Natural disasters increase operating income inequality but decrease transfer income inequality. Poor households are found to be more vulnerable to disasters and suffer significant income losses. However, there is no evidence to suggest that natural disasters significantly reduce the income of upper- and middle-income groups. These findings have important implications for policies aimed at poverty alleviation and revenue recycling, as they can help improve economic justice and enhance resilience to natural disasters.
... Third, extreme weather events and green innovation are connected closely through income inequality to a certain degree. More specifically, using field research data, Keerthiratne and Tol (2018) explored the impact of natural disasters on income inequality in Sri Lanka and found that the occurrence of natural disasters increased income inequality in seasonal agriculture. Alamgir et al. (2021) also used the data of 600 households in Mymensingh in Bangladesh and find that the occurrence of extreme climates has reduced rice production in the region and ultimately increased the proportion of rural residents living in poverty and income inequality. ...
... The coefficient of Affected in column (3) shows that extreme weather destroys green innovation level by widening income equality. This argument is similar with Keerthiratne and Tol (2018) and Urama et al. (2019), who indicated that extreme weather can further increase the risk of poverty and income inequality, which has led governments to take measures to adapt to climate change and implement poverty eradication plans, further squeezing out investment in technological innovation, especially in the environmental field, and ultimately leading to a decline in the level of green innovation. ...
This research investigates the effect of extreme weather events on green innovation by using unbalanced panel data covering 117 countries from 1971 to 2018 and documents strong evidence that extreme weather has a significantly negative impact on green innovation. We also find among the four extreme weather events such as droughts, extreme temperature, floods, and storms that floods have the most prominent adverse impact on green innovation. Furthermore, the significantly negative effect of extreme weather is manifested in countries with a high level of corruption and low level of trade openness, but not in the countries with a low level of corruption and a high level of trade openness. Lastly, we show that extreme weather events have an adverse impact on green innovation by decreasing economic growth level, hindering financial development, widening income inequality, damaging the accumulation of human capital, and increasing the political risk.
... The consequences of natural disasters on global economies depend on the size of the economy and the geographical location [20]. The cost of natural disasters depends on exposure, risk, vulnerability, intensity, duration, frequency, and magnitude [21]. ...
... where t i is the OLS t-ratio of b i (Eq. (21)) in the following expression [107]: (21) where Z t = (y t− 1 , Δy t , Δy t− 1 , …., Δy t− p ) ′ . ...
Natural disasters do occur and have become a global problem due to increasing intensity. Developing countries are mostly affected due to natural disasters owing to a poor environment, feeble adaptation, impoverished socioeconomic conditions, poor infrastructure, limited resources, and unstable institutions. The SDG 11.5 target which highlights the mitigation of loss due to natural disasters––remains crucial to achieving sustainable cities and human settlements––but the literature is limited on this scope. Thus, this research contributes to the literature by incorporating an infrastructure index, foreign direct investment (FDI), human capital index, globalization, and capital formation into the disaster-growth debate across four-income groups in 98 countries from 1995 to 2019. We developed infrastructure and human capital indices using a standard procedure across all income groups. The two-step generalized method of moments employed herein confirmed the income reduction effect of natural disasters. While the economic cost of natural disasters is relatively high in low-income countries and mild in high- and upper-middle-income countries. Besides, infrastructural development, FDI, human capital, globalization, and gross fixed capital formation also affect economic growth across income groups. Thus, the enhancement of socio-economic policies could decline economic losses, especially in vulnerable and poor settlements in developing countries.
... Many disasters bring economic downturns with them, which can increase prices and decrease earnings, creating a precarious financial situation for already vulnerable older adults. For example, in the USA and Sri Lanka, disasters have been seen to increase pre-existing economic inequalities (32,33). Also, in Turkey, it has been observed that the post-disaster fragility of older people, including poverty, is closely related to their pre-disaster socioeconomic situation (30,34). ...
Objective: The concepts of vulnerability and resilience dictate the experiences that older adults have in times of disaster. Our primary purpose is to
shed light on the heavy losses experienced by older adults during the coronavirus disease 2019 (COVID-19) pandemic.
Materials and Methods: In line with this purpose, this phenomenological qualitative study was conducted from March 2022, when the obligation
to wear a mask outside was lifted, until the end of December 2022 with 50 participants aged 65 and over living in İstanbul, using the snowball
method. To understand the participants’ vulnerability and resilience, they were asked about their experiences in these areas. The results were given
in a mixed manner in line with the statements of older citizens.
Results: It has been concluded that older people’s existing health and structural problems break their resilience at the point of vulnerability, and
factors such as socializing, staying connected to others through digital platforms, and receiving social support increase their social resilience.
Conclusion: The older participants in the present study not only expressed their vulnerability; they also recounted their resilience during the
COVID-19 pandemic. As older adults provide intergenerational solidarity to fight against disasters, specific frameworks should be designed to
support this effort.
... Again there are contradicting empirical results in the literature. As an example, Keerthiratne and Tol [60] found that earthquakes decrease income inequality in Sri Lanka. However, Yamamura [19] underlined that earthquakes may increase income inequality in the short-run, but this effect may disappear in the long-run. ...
Earthquakes are major natural disasters that occur frequently worldwide. They have several socioeconomic impacts on countries. At first glance, it seems that as if they cause only large volumes of deaths, injuries and destruction. However, in the medium and long run, they cause several other impacts such as income, employment and production losses, increased government expenditures, inflation explosions and income distortions. All of these impacts are critical especially for developing countries that have more vulnerable economies than developed ones. In this respect, this study aims to analyse the impacts of massive earthquakes on economic growth and income inequality in independent Turkic states. With this purpose, two empirical models are estimated by the Generalized Method of Moments (GMM) with panel data covering the period from 1991 – 2022 for 6 countries. Empirical findings exhibit that major earthquakes do not have significant impacts on the economic growth processes of these countries. However, they have significant impacts on income distortions. In this manner, it seems that despite massive earthquakes, Turkic states have been able to sustain their economic growth processes. However, income inequality has increased as a byproduct of these disasters. This evidence seems substantial for sustainable development policy formations of Turkic states.
... Existing research found that natural disasters affect individuals' well-being (Rehdanz et al., 2015), investor sentiment (Hirshleifer and Shumway, 2003;Kamstra et al., 2003;Kaplanski and Levy, 2010), migration (Saldaña-Zorrilla and Sandberg, 2009;Warner and Afifi, 2014;Cattaneo and Peri, 2016;Pajaron and Vasquez, 2020), risk preferences (Bourdeau-Brien and Kryzanowski, 2020), mental health (Shultz, 2014;Graham et al., 2019;Zhang et al., 2022), and children's development (Rabassa et al., 2012;Deuchert and Felfe, 2015). Furthermore, studies have examined the impact of natural disasters on household income inequality (Yamamura, 2015;Abdullah et al., 2016;Keerthiratne and Tol, 2017), household savings (Filipski et al., 2019), household debt (Gallagher and Hartley, 2017), household consumption (Arndt et al., 2004;Wahdat, et al., 2021), and other household behaviors. Natural disasters cause direct or indirect economic losses to households. ...
Regional information about climate risks and the impacts of climate change is vital in decision-making in a wide range of contexts. In distilling such information from multiple lines of evidence, the values and contextual knowledge of the stakeholders are vital for appropriate interpretation and an appreciation of the relevance of the information. Additionally, the knowledge of how the fitness for purpose guides the selection of the sources facilitates decision-making. This Research Topic of Frontiers in Environmental Science with the theme “Climate Change Information for Regional Impact and Risk Assessment” includes nine articles by authors from various parts of the world.
... They found that higher-income households in the Koyra subdistrict were more vulnerable, with damage costs averaging 42% of their annual income, compared to 16% and 15% for middle-and low-income groups, respectively. Keerthiratne and Tol (2018), using a panel fixed effects estimator to find that natural disasters and their immediate aftermath significantly reduce income inequality, as measured by the Theil index. These results are consistent across various inequality metrics, subsamples, and alternative estimators like Ordinary Least Squares and System GMM. ...
Climate change is the paramount challenge of our era. While considerable attention has been given to its impact on financial stability and economic productivity, there is limited focus on its effects on income inequality. We introduce a unique criterion for sample selection. We aim to provide an empirical analysis of how climate change impacts income inequality in 43 most climate-vulnerable countries, 39 most unequal countries in terms of income distribution, and India separately (1971–2021). We select the most vulnerable countries to investigate the magnitude of income inequality caused by climate change. Given that climate hazards enhance inequality in countries with prevailing socioeconomic inequalities, we choose unequal countries to investigate whether climate change is a significant determinant of their existing condition. We also analyse the relationship for India because India is one of the most climate-vulnerable and unequal countries. We use three climate change indices—vulnerability to climate change, annual surface temperature change, and frequency of climate-related disasters—to check the effects of particular aspects of climate change. We deploy a standard panel regression analysis followed by a series of robustness checks and an autoregressive distributed lag (ARDL) bounds test approach to analyse the link for India. We find that climate change has adverse impacts in both groups and in India, both in the long and short term. Our findings suggest that policymakers in developing countries may need to equally place importance on developmental and climate change abatement goals as well as expedite their environmental targets.
... Disasters can also increase inequality and poverty (Kahn 2005;Stromberg 2007). Keerthiratne and Tol (2018) find that natural disasters in Sri Lanka mainly affect the lowest-income households. Rodriguez-Oreggia et al. (2013) estimate a negative impact of natural disasters on the Human Development Index (HDI) and Poverty Index. ...
... S.Keerthiratne, R. S.J. Tol (2018) Impact of natural disasters on income inequality in Sri Lanka. ScienceDirect. ...
Монографія висвітлює результати першого етапу наукового дослідження, проведеного в рамках проекту Національного фонду досліджень України «Зростання нерівності та бідності в Україні внаслідок пандемії COVID-19». Дослідження зосереджене на пошуках кращого методологічного підходу для оцінювання впливу пандемії COVID-19 на бідність на нерівність в Україні. Узагальнення існуючих міжнародних підходів до оцінювання впливу COVID-19 на соціально-економічні процеси в суспільстві та наявність у авторів потужного досвіду застосування мікроімітаційного моделювання обумовило створення покрокового алгоритму оцінювання впливу на бідність та нерівність. Обраний підхід автори представили як універсальний для дослідження впливу непередбачуваних явищ і процесів на масштаби нерівності та бідності в країні. Також в роботі детально проаналізовано розвиток соціально-економічних процесів внаслідок поширення COVID-19 в Україні, а також довгі ряди динаміки для визначення ключових трендів щодо нерівності та бідності.
(The monograph illuminates the results of the first stage of a scientific study conducted within the framework of the project of the National Research Fund of Ukraine "Increasing Inequality and Poverty in Ukraine due to the COVID-19 Pandemic". The research focuses on finding a better methodological approach to assessing the impact of the COVID-19 pandemic on poverty and inequality in Ukraine. Generalization of existing international approaches to assessing the impact of COVID-19 on socio-economic processes in society, coupled with the authors' extensive experience in microsimulation modeling, led to the creation of a step-by-step algorithm for assessing the impact on poverty and inequality. The authors present the chosen approach as universal for studying the impact of unforeseen phenomena and processes on the scales of inequality and poverty in the country. The work also provides a detailed analysis of the development of socio-economic processes as a result of the spread of COVID-19 in Ukraine, as well as long series of dynamics to determine key trends regarding inequality and poverty.)
... Disasters can also increase inequality and poverty (Kahn 2005;Stromberg 2007). Keerthiratne and Tol (2018) find that natural disasters in Sri Lanka mainly affect the lowest-income households. Rodriguez-Oreggia et al. (2013) estimate a negative impact of natural disasters on the Human Development Index (HDI) and Poverty Index. ...
... Data from the National Confederation of Municipalities (Brasil, 2021a) indicate that disasters had a significant impact on Brazilian society in 2020, with 235 deaths and 41,148,193 people affected. Keerthiratne and Tol (2018) reported that territories affected by natural hazards usually suffer economic damage through losses of physical and human capital which most often cause declines in average income. Sawada and Takasaki (2017) believe that the limited resources of the poorest households create significant disadvantages not only in their vulnerability to disasters but also in their short-term coping capacity. ...
The disaster database enables managers to support prevention, preparedness, and mitigation actions, especially in Latin American countries, where disaster risk data are scarce. This article surveys and analyses a database of disasters in a medium-sized municipality, using official (civil defense) and unofficial (documentary research) sources. The methodology was based on data collection between 1970 and 2021, being classified according to the Brazilian Disaster Codification (COBRADE) and subsequent spatialization of information. The results indicated that 71% of the hazard events were registered in the “natural group” (NG), mainly related to heavy rainfall, and 29% in the “technological group” (TG), these mostly associated with urban fires. Based on spatial analysis, 20 locations (“hotspots”) with the largest occurrences were identified, representing approximately 64.30% of (NG) total records. The city central zone was the location with the highest number of occurrences (133), followed by Jardim Kennedy (64), in the South zone, and Serra São Domingos (53), in the North. The methodology developed is an important tool to support urban planning and disaster risk management in medium-sized cities.
... In the existing literature regarding climate change, extreme climatic events and their impact on economic development-income, expenditure, consumption, and welfare-have been prioritized and discussed extensively. For instance, (Gray and Mueller 2012) paid attention to natural disasters and population mobility, Keerthiratne and Tol (2018) focused on natural disasters and income inequality, Ahmed et al. (2009) studied climate volatility and poverty, and Karim (2018) plotted the impact of climatic disasters (i.e., recurrent flooding) on household income, expenditure, assets, and labor market outcomes. Alamgir et al. (2018) argued that climate change has a potential influence on farmers' net income distribution and regional vulnerability. ...
Bangladesh is a country recognized as “ground zero” in terms of vulnerability due to human-induced climate change, for which it bears the brunt of extreme climatic events. In addition, the number of extreme events is disconcertingly increasing nowadays and, jeopardizing its people, particularly in the southern (cyclone-prone), north-western (drought-prone), and east-northern and central (flood-prone) regions by causing instability and a reduction in sources of income for households, which in turn affects household expenditures. To this end, our study sought to determine the nexus between extreme climatic events and household welfare. For this, we adopted pooled OLS (Ordinary Least Square), fixed effects, and random effects models using three (2011–2012, 2015, and 2018–2019) wave nationally representative data sets of the Bangladesh Integrated Household Survey (BIHS) from rural Bangladesh. The results revealed that climate extremes affect household well-being. Superficially, the fixed effects model (most efficient) showed that climatic extremes led to a 3% decrease in average household expenditures. Moreover, negative coefficients were found for household food and non-food expenditures. Therefore, we propose several policy changes as part of adaptation and mitigation strategies to counter the negative impacts of extreme climate events. These include–income diversification through the creation of off-farm income generating activities (IGAs), an emphasis on sustained technology innovations under the changing climatic conditions, and variety development to tailor solutions to regions suffering from increased saline, droughts, and floods.
... Nonetheless, rainfall anomalies are often indicated as a major risk factor (26), especially for poor individuals in developing countries (27)(28)(29). Indeed, these households are not only often located in flood-prone areas and highly vulnerable to droughts (30), but are also remarkably dependent on income from rain-fed agriculture (31)(32)(33). ...
Climate anomalies, such as floods and droughts, as well as gradual temperature changes have been shown to adversely affect economies and societies. Although studies find that climate change might increase global inequality by widening disparities across countries, its effects on within-country income distribution have been little investigated, as has the role of rainfall anomalies. Here, we show that extreme levels of precipitation exacerbate within-country income inequality. The strength and direction of the effect depends on the agricultural intensity of an economy. In high-agricultural-intensity countries, climate anomalies that negatively impact the agricultural sector lower incomes at the bottom end of the distribution and generate greater income inequality. Our results indicate that a 1.5-SD increase in precipitation from average values has a 35-times-stronger impact on the bottom income shares for countries with high employment in agriculture compared to countries with low employment in the agricultural sector. Projections with modeled future precipitation and temperature reveal highly heterogeneous patterns on a global scale, with income inequality worsening in high-agricultural-intensity economies, particularly in Africa. Our findings suggest that rainfall anomalies and the degree of dependence on agriculture are crucial factors in assessing the negative impacts of climate change on the bottom of the income distribution.
This paper explores the historical origins of the Mafia and its roots in the Sicilian latifundia. By employing earthquake intensity as an instrumental variable to tackle endogeneity concerns, our study reveals a significant relationship between the presence of the Mafia during its initial historical appearances in the second half of the 19th century and the characteristics of latifundia. Latifundia, distinguished by large landowners and extensive agriculture, including the rotation of single-crop, pasture, and fallow lands, is found to be closely linked to this heightened Mafia presence. Moreover, our analysis rules out contemporary socio-economic factors by considering a set of control variables such as agricultural proxies. These findings highlight a persistent historical pattern of inequality, proxied by the spread of latifundia, underscoring the enduring influence of the medieval feudal system, transformed into latifundia, on social dynamics. Our findings suggest that policies aimed at reducing the concentration of land ownership and promoting land reform could effectively have curbed the emergence of organized crime in areas with a history of comparatively higher land ownership inequality.
This study examines the relationship between environmental risks—such as hydrogeological hazards, landslides, volcanic zones, and earthquakes—and income inequality across Italian municipalities, using a comprehensive dataset from 2010 to 2020. Our analysis reveals that municipalities exposed to higher risks, particularly from hydrogeological and landslide hazards, exhibit significantly higher levels of income inequality. Conversely, earthquake risk, notably in Southern Italy, is associated with lower levels of inequality, likely attributable to its disproportionate impact on wealthier individuals, who are more susceptible to real estate and investment losses, further exacerbated by the economic uncertainty associated with such hazards. These findings underscore the importance of focused mitigation strategies and effective communication policies aimed not only at minimizing the physical impacts of these hazards but also at addressing the economic uncertainties they engender, thereby fostering more equitable economic outcomes.
Droughts can dramatically affect economic activities, especially in developing countries where more than half the labor force is in the agricultural sector. This paper highlights the causal impact of drought on income inequality using a new methodology known as the quantile treatment effect on the treated under the copula stability assumption. This method generalizes the difference‐in‐differences framework to the entire distribution. The methodology is applied to a geo‐referenced and nationally representative household survey of two sub‐Saharan African countries: Ethiopia and Malawi. The results show that droughts worsen income inequality in both countries. Lower income quantiles are subject to a higher decrease in per capita income, up to 40% for the lowest income quantile. In contrast, higher income quantiles are largely unaffected or appear to benefit from the drought. These results are robust to several specifications and offer quantitative insights into how extreme weather conditions affect inequality dynamics in developing countries. Inequality formation is driven by differences in the ability to cope with droughts. The results show that wealthier households have a higher capacity to find alternative sources of income to prevent a welfare drop. In contrast, the most vulnerable households, particularly those that are low in assets, remote, or headed by women or older individuals, are most seriously harmed. Finally, consumption‐smoothing behaviors and asset depletion strategies in middle income households are also observed.
To achieve the goal of “peak carbon dioxide emissions and carbon neutrality,” China has proposed significant measures to promote green technological innovation. Though abundant research has confirmed the positive impact of green innovation on the environment, whether environmental factors reciprocally influence green innovation remains insufficiently explored. This study delves into the influence of extreme temperatures on urban green innovation, utilizing panel data from 287 prefecture‐level cities in China spanning from 2003 to 2019. Results indicate that extreme temperatures significantly impede the development of urban green innovation, with a series of robustness tests affirming the reliability of this effect. We find that this effect is transmitted through both the “inequality exacerbation effect” and the “industrial production inhibition effect.” In addition, the dampening effect is more pronounced in cities in the eastern part of the country, in smaller cities, and in cities with low river densities. This paper further finds that extreme heat is the main factor that causes extreme temperature to inhibit green innovation in cities. Moreover, extreme temperatures also had a consistent inhibitory effect on the overall innovation capacity of cities.
The coastal zone is the most intensive area of global economic activity and has been threatened by marine hazards. As climate change increases the vulnerability of coastal communities worldwide, coastal hazard management has become one of the most urgent tasks for ocean governance. While economic development may enhance social resilience, economic inequality, a side effect of economic growth, can play a significant role in social vulnerability to natural hazards. Coastal managers and policymakers urgently need relevant analyses to understand the relationship between economic inequality and marine hazards. Here, we analyzed the links between economic inequality and direct economic losses from storm surge disasters in 11 coastal regions of China between 2000 and 2020. Our results show that provincial income inequality significantly increases direct economic losses from storm surge disasters. For every 1% increase in the provincial disposable income Gini index, annual losses increase by 4.8%-7.8%. Moreover, with a 1% increase in the provincial income gap, relative annual losses (compared with provincial GDP) increase by 0.051%-0.056%. Heterogeneity analysis reveals that losses in northern and eastern marine economic circles are most affected by income inequality. We also find that with increasing economic development level, the aggravating effect of income inequality on losses becomes more significant. Our work indicated that achieving income equity may be a crucial factor for coastal hazard mitigation, which provides new insights into global coastal hazard management.
This study investigates the impact of natural disasters on multidimensional poverty in rural Vietnam and examines the moderating role of social assistance in mitigating these effects. Utilizing data from the Vietnam Household Living Standards Survey in 2016 and 2018, we employ a probit model to analyze the differential impacts of droughts, floods, and storms on various dimensions of poverty, including income, education, health, housing, and access to information. Our findings reveal that droughts have a more pronounced and lasting impact on overall multidimensional poverty compared to floods and storms. Furthermore, we demonstrate the moderating effect of social assistance in alleviating the adverse consequences of floods on multiple aspects of household well‐being. This study contributes to the literature by adopting a comprehensive, multidimensional approach to poverty and highlighting the critical role of social assistance in building resilience to natural disasters. Our results underscore the need for targeted, context‐specific poverty alleviation strategies that address the multifaceted nature of deprivation and the differential impacts of natural disasters on rural households. These findings have significant implications for policymakers and practitioners in designing effective interventions to promote sustainable development and enhance the well‐being of vulnerable communities in the face of increasing climate‐related challenges.
This study investigates the impact of natural disasters on income inequality in Iran from 1980 to 2021. It also explores the moderating effects of financial development and globalization on this relationship. The Non-linear Autoregressive Distributed Lag (NARDL) method is employed for the analysis.
The findings reveal that several factors influence income inequality (measured by the Gini coefficient) in both the short and long term. Positive and significant effects were observed for GDP, inflation, severe natural disasters, and the globalization index. Conversely, education level, the square of GDP (indicating an inverted U-shaped relationship), and the financial development index exhibited negative and significant effects.
These results support Kuznets' hypothesis, suggesting that income inequality initially rises with economic growth (GDP) before ultimately declining. Furthermore, the study confirms an asymmetric effect of financial development and globalization on income inequality. The analysis suggests that an increase in severe natural disasters, globalization, and a decrease in financial development all contribute to rising income inequality in Iran.
The objective of this study is to assess the socio-economic impact of the December 2021 eruption of Mount Semeru in Lumajang, East Java, Indonesia. A field survey was conducted by using 200 valid respondents from three affected districts in the area. The PLS-SEM method (Partial Least Squares - Structural Equation Model) was used to empirically examine the effect of the Semeru eruption on socio-economic activities in the affected districts. The questionnaire, developed based on the Household Resilience concept published by Zahan (2021) and Gaisie et al. (2021), outlines the determinants of household resilience by using five and three indicators or latent variables, respectively. There are two empirical findings. The first finding demonstrates that household resilience is determined by awareness, ability, action, and ecology. The second shows that a higher level of household resilience can lead to a lower economic and social impact of the Mount Semeru eruption. To enhance household resilience, society, regional, and central governments, all of them are able to collaborate to raise awareness, disseminate information on action and ecology regarding Mount Semeru eruptions. The Regional Government and the Regional Agency for Disaster Management in Lumajang are suggested to provide better facilities and improve regulations for mitigation and evacuation.
Energy is known as the lifeline of national development, and from the last decade or so, the security of human energy supply has been frequently disturbed by natural disasters due to global warming and frequent geological activities. In this paper, by combing the literature, we found that the past literature on the relationship between energy and natural disasters mainly focused on measuring energy consumption under natural disasters, but less on the integrated evaluation of human economic activities, energy security and natural disasters, and less on the evaluation of the energy governance efficiency of each provincial, municipal, and autonomous region government in preventing and managing exposure to natural disasters from the perspective of Chinese provinces. Therefore, in order to fill the gap in the literature in this field, this paper collects panel data of energy consumption efficiency stages and natural disaster treatment stages from 2013 to 2017 for 30 provinces in China (excluding Hong Kong, Macao and Taiwan as well as Tibet Autonomous Region) and uses the two-stage undesirable dynamic DDF model as a framework to study the relationship between economic, environmental pollution and natural disasters for the sample data and to analyze the phase-by-phase evaluation of energy and natural disaster efficiency and make corresponding policy recommendations. The following conclusions are drawn: (1) The overall efficiency of China’s eastern coastal provinces is higher than that of the central and western provinces. (2) The first-stage efficiency of Chinese provinces is better than the second stage, and the difference in efficiency of the first stage of each province is smaller than that of the second stage. (3) In terms of the efficiency of disaster prevention and relief inputs, the efficiency values are generally lower in most regions of China. (4) Finally, the annual efficiency of natural disaster losses is not high in all regions, and the efficiency values are higher in the eastern coastal regions than in the central and western regions. Accordingly, this paper proposes that each province should formulate relevant disaster prevention and economic development strategies according to regional characteristics, while the central government should also propose locally appropriate coordinated governance policies to effectively control carbon dioxide emissions and air pollution, as well as increase disaster prevention publicity and incorporate disaster prevention education-related work into the performance assessment mechanism of local governments to promote the interactive development of the two.
Purpose
Climate change increases systematic risk for firms, especially those in the agricultural industry. Therefore, the need to examine the consequences of climate-related risks on agribusiness companies' financial performance across the globe and emerging markets has risen. In this context, the paper aims to investigate the effects of climate change risks on the financial performance of agriculture listed firms in Vietnam.
Design/methodology/approach
The study sample includes 77 Vietnamese listed firms in the agricultural industry in the period of 2015–2019. The authors chose temperature, wind, rainfall and humidity proxies to measure climate change. The OLS regression, random regression and sub-sample analysis have been used to examine the impacts of climate risks on firms' financial performance.
Findings
Empirical results show that rain and temperature have positive impacts on financial performance of Vietnamese agriculture listed firms, while wind and humidity have insignificant impacts on financial performance.
Research limitations/implications
The research helps researchers, businesses, practitioners and policymakers interested in the agricultural industry, especially those in developing and emerging countries, to develop a deep understanding of the impact of climate change risks on firm performance and therefrom prepare necessary measures to reduce the negative impacts.
Originality/value
This study adds to the literature stream on the impacts of climate change on financial performance. It is the first study to investigate this impact in Vietnam, a country which depends mainly on agriculture.
Los desastres naturales constituyen una seria amenaza a nivel global. Cada año una creciente cantidad de desastres naturales tiene lugar en diferentes regiones del mundo (Centre for Research on the Epidemiology of Disasters [CRED], 2020a), y se espera que esto se profundice, a futuro, a consecuencia del cambio climático (Intergovernmental Panel on Climate Change [IPCC], 2018). En esta nota breve se analizan las predicciones teóricas del impacto de los desastres naturales sobre el crecimiento económico, con especial énfasis en los contrastes presentes en los diferentes modelos.
The disaster database enables managers to support prevention, preparedness, and mitigation actions, especially in Latin American countries, where disaster risk data are scarce. This article surveys and analyses a database of disasters in a medium-sized municipality, using official (civil defense) and unofficial (documentary research) sources. The methodology was based on data collection between 1970 and 2021, being classified according to the Brazilian Disaster Codification (COBRADE) and subsequent spatialization of information. The results indicated that 71% of the hazard events were registered in the “natural group” (NG), mainly related to heavy rainfall, and 29% in the “technological group” (TG), mostly associated with urban fires. Based on spatial analysis, 20 locations (“hotspots”) with the largest occurrences were identified, representing approximately 64.30% of (NG) total records. The city's central zone was the location with the highest number of occurrences (133), followed by Jardim Kennedy (64), in the South zone, and Serra São Domingos (53), in the North. The methodology developed is an important tool to support urban planning and disaster risk management in medium-sized cities.
We estimate the impact of natural disasters on financial development proxied by private credit. We employ a panel fixed effects estimator as our main estimation tool on a country level panel data set of natural disasters and other economic indicators covering 147 countries for the period from 1979 to 2011. We find that companies and households get deeper into debt after a natural disaster. This effect is stronger in poorer countries whilst the effect is weaker in countries where agriculture is more important. The magnitude of per capita credit varies across countries regardless of their per capita income. Hence, the real impact of disasters on credit as a share of prevailing per capita credit is country specific as well as time specific. Our findings are robust to alternative estimators, specifications, samples and data. Private credit is only one dimension of financial development and financial markets are less well developed in poor countries which are more vulnerable to disasters. Thus, the immediate impact of natural disasters is better interpreted as households getting (further) into debt rather than as financial development, but we find longer term impacts too that indicate an expansion of credit availability.
Cyclones are the most common natural disaster in Bangladesh. Here, we assess the economic impact of a relatively small cyclone, Cyclone Aila, which hit the Sundarbans region in 2009 and destroyed local infrastructure including many shrimp farms. In contrast to other studies, we found that the higher-income households in the study area (Koyra sub-district) were more vulnerable in both relative and absolute terms. The average damage costs for high income households were 42 % of the yearly income before Aila, whereas this was only 16 and 15 % for middle- and low-income groups, respectively. Higher-income households were also less resilient than middle- and low-income groups, also something rarely reported in the literature. By engaging in new opportunities, the poorest households, by our calculations, increased their income by 16 % compared to their income before Aila. Middle income households decreased their income slightly (by 4 %), while the income of the richest households dropped by about 50 % after the cyclone. Income was more equally distributed across the population after the cyclone than it was before, in particular in the highly and severely affected areas.
Although natural disasters have been found to influence economic growth, their impact on income inequality has not yet been explored. This paper uses cross-country panel data during the period 1965 to 2004 to examine how the occurrence of natural disasters has affected income inequality. The major findings of this study are that although natural disasters have increased income inequality in the short (5 years) term, this effect disappears in the long term (10 years). These findings are observed even after the fixed effects of year and country are controlled for.
Using a simple two-period model of the economy, we demonstrate the potential effects of natural disasters on economic growth
over the medium to long term. In particular, we focus on the effect of such shocks on investment. We examine two polar cases:
an economy in which agents have unconstrained access to capital markets, versus a credit-constrained version, where the economy
is assumed to operate in financial autarky. Considering these extreme cases allows us to highlight the interaction of disasters
and economic underdevelopment, manifested through poorly developed financial markets. The predictions of our theoretical model
are tested using a panel of data on natural disaster events at the country-year level, for the period 1979–2007. We find that
for countries with low levels of financial sector development, natural disasters have persistent negative effects on economic
growth over the medium term. These results are robust to various checks.
Natural disasters are expected exacerbate poverty and inequality, but little evidence exists to support the impact at household level. This article examines the effect of natural disasters on household income, expenditure, poverty and inequality using the Vietnam Household Living Standard Survey in 2008. The effects of a natural disaster on household income and expenditure, corrected for fixed effects and potential endogeneity bias, are estimated at 6.9% and 7.1% declines in Vietnamese household per capita income and expenditure, respectively. Natural disasters demonstrably worsen expenditure poverty and inequality in Vietnam, and thus should be considered as a factor in designing poverty alleviation policies.
Using data for more than 160 countries in the period 1997 to 2010, we explore the impact of large-scale natural disasters on the distance-to-default of commercial banks. The financial consequences of natural catastrophes may stress and threaten the existence of a bank by adversely affecting their solvency. After extensive testing for the sensitivity of the results, our main findings suggest that natural disasters increase the likelihood of a banks’ default. More precisely, we conclude that geophysical and meteorological disasters reduce the distance-to-default the most due to their widespread damage caused. In addition, the impact of a natural disaster depends on the size and scope of the catastrophe, the rigorousness of financial regulation and supervision, and the level of financial and economic development of a particular country.
In terms of its impact on poverty, the recent economic crisis in the Philippines was more of an El Niño phenomenon than a financial crisis. Using household survey data for 1998, Datt and Hoogeveen assess the distributional impact of the recent economic crisis in the Philippines. The results suggest that the impact of the crisis was modest, leading to a 5 percent reduction in average living standards and a 9 percent increase in the incidence of poverty-with larger increases indicated for the depth and severity of poverty. The greater shock came from El Niño rather than through the labor market. The labor market shock was progressive (reducing inequality) while the El Niño shock was regressive (increasing inequality). Not all households were equally vulnerable to the crisis - induced shocks. Household and community characteristics affected the impact of the shocks. Ownership of land made households more susceptible to the El Niño shocks; higher levels of education made households more vulnerable to wage and employment shocks. The impact of the crisis was greater in more commercially developed communities. Occupational diversity within a household helped mitigate the adverse impact. There is some evidence of consumption smoothing by the households affected by the crisis, but the poor were less able to protect their consumption, which is a matter of policy concern. This paper - a product of the Poverty Reduction and Economic Management Sector Unit, East Asia and Pacific Region - is part of a larger effort in the region to better understand the social impact of the crisis.
This article develops a framework for efficient IV estimators of random effects models with information in levels which can accommodate predetermined variables. Our formulation clarifies the relationship between the existing estimators and the role of transformations in panel data models. We characterize the valid transformations for relevant models and show that optimal estimators are invariant to the transformation used to remove individual effects. We present an alternative transformation for models with predetermined instruments which preserves the orthogonality among the errors. Finally, we consider models with predetermined variables that have constant correlation with the effects and illustrate their importance with simulations.
Estimation of the dynamic error components model is considered using two alternative linear estimators that are designed to improve the properties of the standard first-differenced GMM estimator. Both estimators require restrictions on the initial conditions process. Asymptotic efficiency comparisons and Monte Carlo simulations for the simple AR(1) model demonstrate the dramatic improvement in performance of the proposed estimators compared to the usual first-differenced GMM estimator, and compared to non-linear GMM. The importance of these results is illustrated in an application to the estimation of a labour demand model using company panel data.
This paper explores elements of vulnerability to natural disasters in the context of Hurricane Katrina. We examine whether neighborhoods in New Orleans were impacted differently by Hurricane Katrina based on pre-existing social, physical and economic vulnerabilities. We evaluate the degree to which the initial impacts of Hurricane Katrina were distributed among the New Orleans' residents. Geographic Information System (GIS) technology was used to perform analyses using household income, housing values, and elevation and flood levels. Next, we investigate whether particular socio-economic groups in the city were more vulnerable during the response and recovery phases.Findings indicate that Hurricane Katrina caused severe flood damages in the majority of New Orleans neighborhoods, regardless of income, elevation and other social factors. However, findings do suggest that pre-existing socio-economic conditions play a significant role in the ability for particular economic classes to respond immediately to the disaster and to cope with the aftermath of Hurricane Katrina. The paper concludes with policy recommendations to reduce social and economic vulnerabilities to natural disasters, as well as suggestions for future research.