This assumption is relaxed in further specifications by allowing more flexible country-specific trends (e.g., squared). Second, only the maximum wind speed per grid cell and year is used for the calculation of the tropical cyclone damage. Fifteen thousand people were housed in temporary shelters in North Carolina. (2019) show that indirect impacts are nearly as high as direct impacts. Below is the link to the electronic supplementary material. Note that InputOutput coefficients can only range between 0 and 1. 25111299), Oosterhaven J (2017) On the limited usability of the inoperability IO model. They are responsible for a demand shock in the mining and quarrying sectoral aggregate, leading to delayed negative growth effects being persistent over 10years. Tropical cyclones and climate change - Wikipedia Abstract. Unraveling the Effects of Tropical Cyclones on Economic Sectors Worldwide: Direct and Indirect Impacts, $$\begin{aligned} S_{g} = {\left\{ \begin{array}{ll} \max (0, ((M - abs(T)) * \frac{R}{D}^\frac{3}{2} *e^{1-\frac{R}{D}^\frac{3}{2}})+T),&{} \text {if }D<10*R \text { from center to outer core} \\ 0, &{} \text {if }D>10*R \text { out of radius}. The country fixed effects \(\theta _i\) control for unobservable time-invariant country-specific effects, such as culture, institutional background, and geographic location. Economics of Disasters and Climate Change (pp. Oscar A. Ishizawa, Juan Jos Miranda & Eric Strobl, Aiman Sana, Farzana Naheed Khan & Umaima Arif, Preeya S. Mohan, Nekeisha Spencer & Eric Strobl, Channing Arndt, Paul Chinowsky, James Thurlow, Jimena Alvarez, Dmitry Yumashev & Gail Whiteman, Environmental and Resource Economics Barrot J-N, Sauvagnat J (2016) Input specificity and the propagation of idiosyncratic shocks in production networks. 2015). https://www.munichre.com/en/solutions/for-industry-clients/natcatservice.html, Newey WK, West KD (1987) A simple, positive semi-definite, heteroskedasticity and autocorrelation consistent covariance matrix. For both variables, I use the year-by-year variation calculated from the Climatic Research Unit (CRU) version 4.01, which is available at a resolution of approximately 50km since 1901 (University of East Anglia Climatic Research Unit et al. While there exists a lot of theoretical work on the importance of cross-sectional linkages in consequence of a shock (see e.g., Dupor 1999; Horvath 2000; Acemoglu etal. (2012) demonstrate that only the agricultural sector is negatively affected. Thus, tropical cyclones are and will continue to be a serious threat to the life and assets of a large number of people worldwide. By doing so, I test the null-hypothesis of no effect of the damage variable. The word hurricane is only used in the Atlantic, Caribbean Sea, Gulf of Mexico, and eastern Pacific, for storms that sustain winds at or above 74 miles per hour. Figure 6 illustrates the cumulative point estimates of the past influence of tropical cyclone damage on the different sectoral growth variables.Footnote 22 The x-axis represents the lags of the damage variable, while the y-axis indicates the size of the cumulative coefficient \(\beta\) (in standard deviations). Quick Answer: How Did Hurricane Florence Impact Public Health Additionally, within the agriculture, hunting, forestry, and fishing sectors, only the fishing sector experiences indirect negative effects. 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. How did the Tropical Cyclone Florence impact the people communities? Given that producers in modern economies are . How Tropical Cyclone Eloise Impacted the Environment Even though, I thereby omit potential rainfall and storm surge damage, it is a common simplification in the literature (Hsiang 2010; Strobl 2011; Strobl 2012; Elliott etal. How did the tropical cyclone impact environment Florence? | how did Econ Syst Res 25(1):2049, Lenzen M, Malik A, Kenway S, Daniels P, Lam KL, Geschke A (2019) Economic damage and spillovers from a tropical cyclone. The Aftermath of Hurricane Florence | AIR Worldwide Compared to the existing literature, the non-existing of a direct positive contemporaneous response of the construction sector is a new finding. Appendix A.6 first shows the results of the randomization tests, followed by coefficient plots that summarize the remaining specifications. Unraveling the Effects of Tropical Cyclones on Economic Sectors Put in relation to the sample average per capita growth rate (2.53%), the effect translates to a decrease of \(-46\)%. Tropical cyclone | Definition, Causes, Formation, and Effects Stagnant water can cause the spread of disease, and transportation or communication infrastructure may have been destroyed, hampering clean-up and rescue efforts. Their destructiveness has three sources: damaging winds, storm surges, and heavy rainfalls. The Effects of Cyclones on the Environment | Sciencing 2019). Global warming has 'changed' spread of tropical cyclones around the world Fourth, to alleviate concerns of biased uncertainty measures (Hsiang 2016), I calculate different standard errors: NeweyWest standard errors with a lag length of 10 years and Conley-HAC standard errors, allowing for a spatial and temporal dependence within a radius of 1000km and within a time span of 10 years. In further specifications, I include additional control variables \({\mathbf {Z}}_{i,t-1}\) to account for potential socioeconomic or climatic influences. These opposing production changes may be one of the reasons why we can see no aggregate direct cost effects. Notes This figure demonstrates the distribution of the tropical cyclone damage variable (in standard deviations) for exposed agricultural areas (a) and exposed population (b) from 1970 to 2015, Figure 3 shows the country-year observations of the tropical cyclone damage variable for (a) exposed agricultural land and (b) exposed population. Details of How did the tropical cyclone eloise impact the environment? Given these positive demand effects, one may ask why a significant contemporaneous positive direct effect for the construction sector cannot be seen. The results of the InputOutput analysis, summarized in Appendix A.6.2, are a little less robust. The analysis is conducted on a country-year level. While the importance of the fishing sector for indirect tropical cyclones effects is a novel finding, it does not mean that other agricultural sectors do not exhibit negative direct effects.Footnote 28. Int J Disaster Risk Sci 10(2):166178, Munich R (2018) NatCatSERVICERelevant natural loss events worldwide 19802018. 6, these positive demand shocks lead to a positive growth impulse in the construction sector. Additionally, I allow for country-specific linear trends \(\mu _i*t\). Direct impacts on commercial property and infrastructure can lead to production shortfalls. Best track data are a postseason reanalysis from different available data sources, including satellites, ships, aviation, and surface measurements, that are used to describe the position and intensity of tropical cyclones (Kruk etal. The agricultural sector relies heavily on environmental conditions as most of its production facilities lie outside of buildings and are hence more vulnerable to the destructiveness of tropical cyclones. Bakkensen LA, Park D-SR, Sarkar RSR (2018) Climate costs of tropical cyclone losses also depend on rain. Freddy: The deadly cyclone that lasted more than a month I decide not to use the WIOD database because its country sample is not very exposed to tropical cyclones. The economic impacts of tropical cyclones on a mature destination The error bars depict the 95% confidence intervals. 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. 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. For tropical cyclones, no empirical cross-country study on indirect effects exists so far. Driven by climate change, at least in some ocean basins (Elsner etal. Q J Econ 131(3):15431592, Berlemann M, Wenzel D (2018) Hurricanes, economic growth and transmission channels: empirical evidence for countries on differing levels of development. J Dev Econ 97(1):130141, Terry JP (2007) Tropical cyclones: climatology and impacts in the South Pacific. I am grateful for comments made by Axel Dreher, Vera Eichenauer, Andreas Fuchs, Lennart Kaplan, Eric Strobl, and Christina Vonnahme. 2632). In light of this finding, one could question the reliability of the agricultural weighting scheme for the damage variable. The error term \(\epsilon _{i,t}\) is clustered at the country level. 2019). One major effort of this paper is to generate a new meaningful sectoral damage variable on a country-year level. Mohan (2017) provides further evidence that in Caribbean countries agricultural crops are more severely affected by hurricanes compared to livestock. It comprises the logged per capita value added of the respective sector j to simulate a dynamic panel model, the population growth rate, a variable for openness (i.e., imports plus exports divided by GDP), and the growth rate of gross capital formation.Footnote 18 Including these socioeconomic control variables introduce some threats to causal inference. Evidence from India. In particular, I calculated the leverage and dfbeta of the damage coefficient. This finding clearly opposes the build-back-better hypothesis as well as the recovery to trend hypothesis. Eur Econ Rev 101:441458, Chhibber A, Laajaj R (2008) Disasters, climate change and economic development in Sub-Saharan Africa: lessons and directions. Mon Weather Rev 142(10):38813899, Sieg T, Schinko T, Vogel K, Mechler R, Merz B, Kreibich H (2019) Integrated assessment of short-term direct and indirect economic flood impacts including uncertainty quantification. NBER Working Paper 20352. http://www.nber.org/papers/w20352.pdf, Islam N (1995) Growth empirics: a panel data approach. So unfortunately, WA can expect regular cyclone impacts even as the climate . This cost could climb higher as many rivers have yet to crest and may yet cause additional flooding. How did tropical cyclone Florence impact the economy? Appendix A.3 provides a more detailed description of the composition of the individual ISIC categories. The sectoral GDP data originates from the United Nations Statistical Division (UNSD) (United Nations Statistical Division 2015b). 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. In this respect, the results of this research can also be used to calculate the future costs of climate change. Sci Rep 9(1):20452322. Flooding could prove devastating. With this paper, I close this research gap by using an InputOutput panel data set to analyze potential sectoral interactions after the occurrence of a tropical cyclone. It is possible that the economy exhibits positive growth rates after a first negative growth shock. 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. Rev Environ Econ Policy 7(2):181198, Aznar-Siguan G, Bresch DN (2019) CLIMADA v1: a global weather and climate risk assessment platform. Sectoral GDP is defined as gross value added per sector aggregate and is collected for different economic activities following the International Standard Industrial Classification (ISIC) revision number 3.1. World Dev 21(9):14171434, Angrist JD, Pischke J-S (2009) Mostly harmless econometrics: an empiricists companion. 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. However, little is known about the empirical InputOutput effects across broader sectors after a natural disaster shock. What is the Impact of Coriolis Force and Latent Heat on the.. First, I run two randomization tests: a Placebo test by using leads instead of the contemporaneous measure of the damage variable and a Fisher randomization test, where I randomly permute the years.Footnote 29 Second, to rule out potential omitted variable biases, I include additional climatological variables (precipitation and temperature) and a set of socioeconomic variables (population growth rate, economic openness, the growth rate of the gross capital formation, and logged per capita value added of the respective sector).Footnote 30 Third, I test different trend specifications: region-specific, nonlinear, and no trends at all. J Mon Econ 45(1):69106, Hsiang SM (2010) Temperatures and cyclones strongly associated with economic production in the Caribbean and Central America. This means that if a grid cell of a country was exposed to two storms in oneyear, only the physically more intense storm is considered. \end{array}\right. } The procedure is hierarchical and reaches from other official governmental publications over publications from other international organizations to the usage of data from commercial providers (United Nations Statistical Division 2015b). This hypothesis is supported by empirical findings for a positive GDP growth effect for Latin American countries (Albala-Bertrand 1993), for high-income countries (Cuaresma etal. Kunze, S. Unraveling the Effects of Tropical Cyclones on Economic Sectors Worldwide: Direct and Indirect Impacts. 2014). Google Scholar, Albala-Bertrand J-M (1993) Natural disaster situations and growth: a macro-economic model for sudden disaster impacts. After controlling for country and time specific effects, my estimation approaches allow for a causal identification of the direct and indirect responses to tropical cyclones damages with only little assumption needed (Dell etal. 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. 2014) remain. Anthropogenic influences on major tropical cyclone events 2023 Springer Nature Switzerland AG. Once it makes landfill, Florence is expected to lash coastal communities with 130-mph winds and to dump several feet of water. About 12 hours before Hurricane Florence makes an appearance, both of Duke Energy's North Carolina plants will shut down. 7. There are two important points to note about this tropical cyclone damage variable. Economic impact of Hurricane Florence set to devastate US east coast 2012, 2013). Clim Change 114(3):745768, Ghosh A (1958) Input-output approach in an allocation system. The new climate-economy literature. 1315 show the cumulative results for different lag lengths (5, 10, 15), and Tables 1315 exhibit the underlying estimations. This suggests that the production chains of the economy are only slightly disrupted by tropical storms, and indirect impacts are thus negligible. Furthermore, the results of the randomization test show that the \(H_0\) of no effect of tropical cyclone damage can be rejected at the 1% and 5% level of confidence for the agriculture, hunting, forestry, and fishing and wholesale, retail trade, restaurants, and hotels sectors, respectively. Environ Resource Econ 78, 545569 (2021). 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. Concurrently, the construction sector demands significantly more input (1.84%) from the agriculture, hunting, forestry, and fishing sector. Storms that are strongest originate off the west coast of Africa because they have two weeks worth of warm water to build up over. The underlying tables are only included for the direct sectoral effects, while the robustness tables for the InputOutput analysis are available upon request. To deal with this problem, I will re-estimate my regression models with Newey and West (1987) as well as spatial HAC standard errors (Hsiang 2010; Fetzer 2020), which allow for a temporal correlation of 10years and a spatial correlation of 1000 kilometer radius.Footnote 20. This is an improvement in comparison to Hsiang (2010) who only focuses on 26 Caribbean countries, which are highly exposed but only account for 11% of global GDP in 2015 (United Nations Statistical Division 2015c). Older empirical studies suffer to a large extent from endogeneity problems in their econometric analysis because their damage data are based on reports and insurance data, such as the Emergency Events Database (EM-DAT). Across the Caribbean the economic costs of tropical cyclones amount to 2% of GDP annually since the 1950. 2010). From a theoretical perspective, a natural disaster can have both positive and negative effects. Eastern North Carolina is prone to flooding associated with tropical cyclones (e.g., hurricanes Fran in 1996 and Matthew in 2016) and it is likely that an event similar to the Hurricane Florence . For example, Loayza etal. 2013). Climate change will lead to fewer tropical cyclones overall. 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. It asks for less input from the wholesale, retail trade, restaurants, hotels and mining and utilities sector aggregates, which results from a supply shock in the agricultural sector. Immediately after the disaster, the policy should concentrate on the agriculture, hunting, forestry, and fishing, and the wholesale, retail trade, restaurants, and hotels sector aggregates, as they are most vulnerable, and/or recovery measures have not been conducted efficiently in these sectors. Resembling large whirlpools, they are made up of rotating, moist air, with wind speeds that can reach over 120 km/h. In order to design effective mitigation and adaptation disaster policies to this threat, it is important to understand the economic impact of natural disasters. First, I only use the damage fraction due to maximum wind speed of tropical cyclones. Depending on the level of aggregation, I run 49 (7*7) or 676 (26*26) different regressions. Alfred-Weber-Institute for Economics, Heidelberg University, Bergheimerstrasse 58, Heidelberg, 69115, Germany, You can also search for this author in Gross value added is defined by the UNSD as the value of output less the value of intermediate consumption (United Nations Statistical Division 2015a). Furthermore, one could also argue that the estimation results are biased by the fact that certain regions have a higher exposure to tropical cyclones than others. https://unstats.un.org/unsd/snaama/assets/pdf/methodology.pdf, United Nations Statistical Division (2015c) UN data. I show that tropical cyclones have a significantly negative impact on the annual growth rate of two sectoral aggregates: agriculture, hunting, forestry, and fishing and wholesale, retail trade, restaurants, and hotels. J Econ Geogra 20(3):857877, NHC (2016) National hurricane center forecast verification. Based on a fine-gridded wind field model, I generate a new sector-specific damage measure weighted by either agricultural land use or population data. The different colors represent different average coefficients, ranging from 0 (light purple) to 0.24 (dark purple). Additionally, the GTAP database is not freely available and only covers a few years. On the other hand, EORA26 works continuously on quality check reports and compares its result to other InputOutput databases such as GTAP or WIOD.Footnote 13. Queensland has 20% of Australia's sugar cane production, but . 2019). However, as an additional robustness test, I also show a regression where I include these outliers and the results remain unchanged. (Color figure online). 18. What will Hurricane Florence impact be on the economy? 2019). Nearly 2 million people have died globally due to tropical cyclones. Figure 8 also offers an explanation for the downturn of the mining and utilities (C&E) sector aggregate after some years, as shown in Fig. The findings can help them to identify the sectors for which they must reduce disaster risk. The results can be found in Fig. Environ Sci Technol 46(15):83748381, Lenzen M, Moran D, Kanemoto K, Geschke A (2013) Building Eora: a global multi-region input-output database at high country and sector resolution. 2632). The main causal identification stems from the exogenous nature of tropical cyclones, whose intensity and position are difficult to predict even 24h before they strike (NHC 2016). The meteorological history of Hurricane Florence spanned 22 days from its inception on August 28, 2018, to its dissipation on September 18. While some studies provide evidence of only a short-term economic impact of tropical cyclones (Bertinelli and Strobl 2013; Elliott etal. The main specification is estimated for each of the \(j(={1,,7})\) sector aggregates separately. 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. The authors find that after the 2008 Wenchuan Earthquake neighboring counties suffer from indirect negative growth effects due to changes within the manufacturing sectors. All weights are available in the HYDE 3.2 data set (Klein Goldewijk etal. 2010).Footnote 4, To calculate a new aggregate and meaningful measure of tropical cyclone damage separated by economic sectors on a country-year level, I make use of the CLIMADA model developed by Aznar-Siguan and Bresch (2019) at a resolution of 0.1\(^{\circ }\).Footnote 5 The model employs the well-established Holland (1980) analytical wind field model to calculate spatially varying wind speed intensities around each raw data observation track.Footnote 6 The model is restricted to raw data wind speed intensities above 54 km/h and it interpolates the 6-h raw data observations from the IBTrACS data to hourly observations.Footnote 7.