The sectors least affected by indirect changes are the agriculture (ag), recycling (re), private households (ph), and export (ex) sectors. Furthermore, I cluster the standard errors at broader regional levels to account for the event that tropical cyclones can also affect neighboring countries within one region.Footnote 31 Additionally, I control for the yearly tropical cyclone frequency per year, I test a different damage variable (mean instead of maximum cubed wind speed per year), and include tropical cyclone basin fixed-effects in further robustness tests. 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. Asterisks and color intensities indicate p values according to: ***\(p<0.01\), **\(p<0.05\), *\(p<0.1\). The radius of maximum wind (R, in km) is related to the latitude (L) of the respective raw data tropical cyclone position in the following way: Since the tropical cyclone data are available at global coverage since 1950, I will extend my database later for further specifications. Details of How did the tropical cyclone eloise impact the environment? 2632). Possible mechanisms for this situation are, for example, additional capital flowssuch as remittances from relatives living abroad (Yang 2008)international aid (deMel etal. Wilmington remained cut off for at least a week following Hurricane Florence delaying the distribution of food, water and . In contrast to this, the no recovery hypothesis states that natural disasters can lead to a permanent decrease of the income level without the prospect of reaching the pre-disaster growth path again.Footnote 1 This could result from a situation where recovery measures are not effectively implemented or where various negative income effects accumulate over time (Hsiang and Jina 2014; Onuma etal. As climate change is warming ocean temperatures, there is potentially more of this fuel available. Compared to the existing literature, the non-existing of a direct positive contemporaneous response of the construction sector is a new finding. Both variables are associated with the occurrence of tropical cyclones since they only form when water temperatures exceed 26 \(^{\circ }\)C and torrential rainfalls usually constitute part of them. Effects of tropical cyclone damage on sectoral GDP growth compared to sample average. The weighted tropical cyclone damage variables are orthogonal to economic growth as well as the InputOutput coefficients, and the panel approach allows me to identify the causal effect. 2018; Elliott etal. \end{aligned}$$, $$\begin{aligned} Damage_{i,t}= \dfrac{\sum _{g \in i}w_{g,t-1}}{W_{i,t-1}}*\sum _{g \in i} S (max)_{g,t}^{3}\mathbb {1}_{S(max)>92}, \end{aligned}$$, $$\begin{aligned} IO_t^{j,k}=\frac{Input_t^{j,k}}{Total Input_t^j} \end{aligned}$$, $$\begin{aligned} Growth_{i,t-1->t}^j=\alpha ^j + \beta ^j * Damage_{i,t} +\gamma ^j*{\mathbf {Z}}_{i,t-1} + \delta _t^j + \theta _i^j + \mu _i^j*t + \epsilon _{i,t}^j, \end{aligned}$$, $$\begin{aligned} Growth_{i,t-1->t}^j= & {} \alpha ^j + \sum _{L=0}^{20}( \beta _{t-L}^j * Damage_{i,t-L}) +\gamma ^j*{\mathbf {Z}}_{i,t-1} \nonumber \\&+ \delta _t^j + \theta _i^j + \mu _i^j*t + \epsilon _{i,t}^j, \end{aligned}$$, $$\begin{aligned} IO_{i,t}^{j,k}= & {} \alpha ^{j,k} + \beta ^{j,k} * Damage_{i,t}+ \lambda ^{j,k}*IO_{i,t-1}^{j,k} +\gamma ^{j,k}*{\mathbf {Z}}_{i,t-1} \nonumber \\&+\,\delta _t^{j,k} + \theta _i^{j,k} + \mu _i^{j,k}*t + \epsilon _{i,t}^{j,k}, \end{aligned}$$, $$\begin{aligned} R = {\left\{ \begin{array}{ll} 30, &{} \text {if } L \leqq 24^\circ \\ 30 + 2.5*abs(L)-24, &{} \text {if } L> 24^\circ \\ 75, &{} \text {if } L > 42^\circ . Google Scholar, Albala-Bertrand J-M (1993) Natural disaster situations and growth: a macro-economic model for sudden disaster impacts. 2019). Resembling large whirlpools, they are made up of rotating, moist air, with wind speeds that can reach over 120 km/h. WMO continues to monitor the "remarkable" tropical storm, which has cut a destructive path across . The data are collected every year for as many countries and regions as possible.Footnote 11 The sample used in my analysis covers the 19702015 period and includes a maximum of 205 countries.Footnote 12, To analyze potential sectoral shifts within the economy after a tropical cyclone, I take advantage of the InputOutput data of EORA26 (Lenzen etal. My results indicate that this negative aggregate effect can be attributed to two sectoral aggregates, including agriculture, hunting, forestry, and fishing; manufacturing and wholesale, retail trade, restaurants, and hotels. The manufacturing sectors use significantly less input from itself, which is not shown in Fig. 2019). Cyclone Eloise. In the first test, I introduce a variable which counts the yearly frequency of tropical cyclones above 92 km/h per country (see Appendix Table 40 and Figs. I also checked for different lag lengths, but could hardly find any effect above a lag length of five years. The damaging winds are responsible for serious destruction of buildings and vegetation. Econ J 129(619):13271342, He S (2017) Randomization inference with Stata: a guide and software. 2013), I control for the mean temperature and precipitation of a country in further specifications. Given that producers in modern economies are . In total, I exclude five country-year observations from my analysis: Dominican Republic 1979, Grenada 2004, Montserrat 1989, Myanmar 1977, and Saint Lucia 1980. Table 1 presents the results of the main specification for each of the seven annual sectoral GDP per capita growth rates. Tropical cyclones are immensely powerful and can travel up to speeds of 65 km/h. Excellent proofreading was provided by Jamie Parsons and Harrison Bardwell. Furthermore, I use a more specific damage function than Hsiang & Jina (2014) which takes account of different sectoral exposure. This change can be regarded as reconstruction efforts, which is also reflected in the relatively rapid recovery of the agricultural sector aggregate in Fig. Cyclone Nivar : A cyclone is a general term for a weather system in which winds rotate inwardly to an area of low atmospheric pressure. www.emdat.be, Haimes YY, Jiang P (2001) Leontief-based model of risk in complex interconnected infrastructures. (Color figure online). 4. About how did tropical cyclone eloise impact the economy. 2014). Econ Syst Res 29(3):452461, Ouattara B, Strobl E (2013) The fiscal implications of hurricane strikes in the Caribbean. To the best of my knowledge, this is the first paper that analyzes global sectoral interactions after the occurrence of a tropical cyclone. In addition, in a recent working paper, Hsiang and Jina (2014) even demonstrate a long-term negative impact of tropical cyclones of up to 20 years. The InputOutput analysis demonstrates that production processes are only slightly disturbed by tropical cyclones. Most worryingly, the majority of all sectors experience delayed negative effects underpinning how far away the international community remains from a build-back better or recovery to trend situation for tropical cyclone-affected economies. A tropical cyclone is a low pressure system that develops over tropical waters, characterized by high winds and heavy rain. The findings can help them to identify the sectors for which they must reduce disaster risk. The robustness tests that frequently fail are those with Conley-HAC and NeweyWest standard errors. Based on damage estimates from EM-DAT, the authors find a negative effect for the agricultural and a positive effect for the industrial sector. I decide not to use the WIOD database because its country sample is not very exposed to tropical cyclones. 912, while Tables 511 show the regression results. Queensland has 20% of Australia's sugar cane production, but . Nonetheless, the results can provide general guidance for international disaster relief organizations that are active in various countries on how to direct their long-run disaster relief programs. Other studies analyze the disasters impact on single sectors, such as the agricultural (Blanc and Strobl 2016; Mohan 2017) or the manufacturing sector (Bulte etal. This corresponds to a mean annual global loss of USD 16.7 billion (measured in constant 2005 USD) for the sample average. NBER Working Paper 20352. http://www.nber.org/papers/w20352.pdf, Islam N (1995) Growth empirics: a panel data approach. Tropical Cyclone Cheneso was a strong tropical cyclone that affected Madagascar in January 2023. 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. Tropical cyclones use warm, moist air as their source of energy or "fuel". During 6 February, the Australian Bureau of Meteorology (BoM) reported that the tropical low had developed into a Category 1-cyclone on the Australian scale . An exception forms the mean damage robustness test for the wholesale, retail trade, restaurants, and hotels sectors, where the coefficient turns slightly insignificant (\(p=0.12\)). Econometrica 49(6):14171426, Noy I (2009) The macroeconomic consequences of disasters. Within the agriculture, hunting, forestry, and fishing sectors, the negative effects become less pronounced with a zero effect being present after fouryears, while the wholesale, retail trade, restaurants, and hotels sectoral aggregate experiences a persistent negative growth even after 20years. Depending on the level of aggregation, I run 49 (7*7) or 676 (26*26) different regressions. First, as shown by Nickell (1981), there is a systematic bias of panel regressions with a lagged dependent variable and fixed effects. In comparison, in my analysis, I take meteorological data as input which is exogenous to the political and economic situation, contains all existing tropical cyclones, and has no quality fluctuations. 2. Other basins have different names for the same phenomenon: tropical cyclone. Winds have lessened to 45 mph. Note that InputOutput coefficients can only range between 0 and 1. 2014) remain. Hence, I interpolate the data to generate yearly observations. However, we still can learn from this analysis of how certain direct effects evolve. The images or other third party material in this article are included in the article's Creative Commons licence, unless indicated otherwise in a credit line to the material. Notes This figure shows the effect of a one standard deviation increase in tropical cyclone damage on the per capita sectoral GDP growth rate compared to the respective sample average. In total, the majority of all sectoral aggregates experience lagged negative growth effects due to tropical cyclones. 2019). For large weather systems, the circulation pattern is in a counterclockwise direction in the Northern Hemisphere and a clockwise direction in the Southern Hemisphere. http://data.un.org/Explorer.aspx?d=SNAAMA, University of East Anglia Climatic Research Unit, Harris IC, Jones PD (2017) CRU TS4.01: climatic research unit (CRU) time-series (TS) version 4.01 of high-resolution gridded data of month-by-month variation in climate (Jan. 1901Dec. The agriculture, hunting, forestry, and fishing sector aggregate first depicts negative growth rates but then quickly recovers after four years. As demonstrated in Fig. The main specification is estimated for each of the \(j(={1,,7})\) sector aggregates separately. InputOutput models that analyze indirect costs, such as the Inoperability Input-Ouptut model (Haimes and Jiang 2001) or the Ghosh model (Ghosh 1958), require many assumptions that tend to be problematic (Oosterhaven 2017). The findings could help to explain why there has been no discernible change in the number of tropical cyclones occurring globally over the past 40 years, says Murakami: "We don't find any clear trend in the number of global tropical cyclones over the last 40 years. (2012) find no significant for the service sector.Footnote 21 Likely reason for this downturn could be less (domestic and international) touristic income for the restaurant and hotel sectors (Hsiang 2010; Lenzen etal. I find a significantly negative influence of tropical cyclones on two sector aggregates including agriculture, as well as trade and tourism. Therefore, we can be sure that the reduced sample size does not drive the new results. This heat is the energy that is released or absorbed during a phase change in water. The build-back-better hypothesis describes a situation where natural disasters first trigger a downturn of the economy, which is then followed by a positive stimulus, leading to a higher growth path than in the pre-disaster period. The largest negative impacts can be attributed to the annual growth in the agriculture, hunting, forestry, and fishing sector aggregate, where a standard deviation increase in tropical cyclone damage is associated with a decrease of 262 percentage points of the annual sectoral growth rate. The coefficients range between zero and one. Abstract. In the second test, I take the mean wind speed cubed \((S(mean)^3_{g,t})\) above 92 km/h per grid and year to calculate the \(damage_{i,t}\) (see Appendix Table 41 and Figs. This suggests that the production chains of the economy are only slightly disrupted by tropical storms, and indirect impacts are thus negligible. Alfred-Weber-Institute for Economics, Heidelberg University, Bergheimerstrasse 58, Heidelberg, 69115, Germany, You can also search for this author in How did the tropical cyclone impact the people communities? In consequence to tropical cyclone damage, less tourists visit affected countries (Hsiang 2010), since they perceive these destinations as too risky to travel to (Forster etal. In coastal areas, storm surges can lead to flooding, the destruction of infrastructures and buildings, the erosion of shorelines, and the salinization of the vegetation (Terry 2007; Le Cozannet etal. Int J Remote Sens 38(21):59926006, Mohan PS, Spencer N, Strobl E (2019) Natural hazard-induced disasters and production efficiency: moving closer to or further from the frontier? A study led by Kevin Reed, PhD, Assistant Professor in the School of Marine and Atmospheric Sciences (SoMAS) at Stony Brook University, and published in Science Advances, found that Hurricane. 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}. Economic sectors most vulnerable to direct capital destruction of tropical cyclones must be identified. Eur Econ Rev 101:441458, Chhibber A, Laajaj R (2008) Disasters, climate change and economic development in Sub-Saharan Africa: lessons and directions. 3, the empirical approach is described. Some areas experience record rainfall with widespread flooding and predictions for it to get worse. The recovery to trend hypothesis characterizes a pattern where after a negative effect in the short run, the economy recovers to the previous growth path after some time. In light of this finding, one could question the reliability of the agricultural weighting scheme for the damage variable. I decide to only examine changes in the InputOutput coefficients and not at indirect costs because it almost needs no assumptions. However, the InputOutput analysis shows that production processes are sticky and indirect economic effects are limited. 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. Tropical cyclones are large, cyclonically rotating wind systems that form over tropical or sub-tropical oceans and are mostly concentrated on months in summer or early autumn in both hemispheres (Korty 2013). The result offers a better understanding of the finding of Hsiang & Jina (2014), who show that tropical cyclones have long-lasting negative impacts on GDP growth by demonstrating which sectors are responsible for the long-lasting GDP downturn that they identify. As per the guidelines of the World . Since the EORA26 database also offers the data decomposed for 26 sectors, this section demonstrates the results of model 6 in more detail. The impact of cyclones can be extremely devastating, both in terms of loss of life and damage to infrastructure. For the agricultural sector, I use the fraction of exposed agricultural land, while for the remaining sectors, I use the gridded population. Social impacts TBC homes destroyed. 2015). The dynamic analysis reveals that past tropical cyclones have a negative influence on the majority of sectors providing evidence for the no recovery hypothesis discussed in the literature. 2023 Springer Nature Switzerland AG. However, one year later, as shown in Fig. The gray areas represent the respective 95% confidence intervals and the red line indicates the respective (connected) cumulative point estimates. Agricultural land and population count in Australia, 2008. To underpin the causal identification, I conduct a falsification test, where I introduce leads instead of lags of the Damage variable, as well as a Fisher randomization test. Am Econ J Appl Econ 8(2):123153, Guha-Sapir D, CRED (2020) EM-DAT: the emergency events database. Nat Clim Change 2(3):205209, Miranda JJ, Ishizawa OA, Zhang H (2020) Understanding the impact dynamics of windstorms on short-term economic activity from night lights in Central America. 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. So unfortunately, WA can expect regular cyclone impacts even as the climate . It has been shown that the damage of tropical cyclones increases non-linearly with wind speed and occurs only above a certain threshold. Environ Resource Econ 78, 545569 (2021). Nearly 2 million people have died globally due to tropical cyclones. The impact of weather on economic growth and its production factors, Climate change and developing country growth: the cases of Malawi, Mozambique, and Zambia, A framework for assessing the economic impacts of Arctic change, https://github.com/davidnbresch/climada/blob/master/docs/climada_manual.pdf, https://www.munichre.com/en/solutions/for-industry-clients/natcatservice.html, https://ideas.repec.org/c/boc/bocode/s352601.html, http://www.nhc.noaa.gov/verification/verify5.shtml, https://unstats.un.org/unsd/snaama/Metadata/Glossary#, https://unstats.un.org/unsd/snaama/assets/pdf/methodology.pdf, http://data.un.org/Explorer.aspx?d=SNAAMA, http://creativecommons.org/licenses/by/4.0/. The cross-sectoral dependence is most pronounced for the manufacturing (D) and other activities (JP)sectoral aggregates. Glob Environ Change 26:183195, Knapp KR, Kruk MC, Levinson DH, Diamond HJ, Neumann CJ (2010) The international best track archive for climate stewardship (IBTrACS). Therefore, I include the mean level of temperature and precipitation as additional climate controls in a further specification. Mon Weather Rev 108(8):12121218, Horvath M (2000) Sectoral shocks and aggregate fluctuations. The absolute size of this effect is approximately more than 2.5 times the size of the coefficient in the wholesale, retail trade, restaurants, and hotels sector aggregate. Their destructiveness has three sources: damaging winds, storm surges, and heavy rainfalls. J Eur Econ Assoc 18(6):33373375, Forster J, Schuhmann PW, Lake IR, Gill JA (2012) The influence of hurricane risk on tourist destination choice in the Caribbean. Sept. 15: Florence is a 350-mile-wide tropical storm that is dumping massive amounts of rain throughout the Carolinas. However, the country fixed effects partly control for this concern. 5. Additionally, the lagged dependent variable controls for a sluggish adjustment to shocks of the individual sector input composition. Springer, New York, London, Toya H, Skidmore M (2007) Economic development and the impacts of natural disasters. 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. Stat Softw Compon S352601. In response to this, numerous studies of databases1 from around the world have been undertaken to examine the factors responsible for this increase. Tropical cyclones only lead to a small number of production process changes with coefficients being relatively small. While the distribution reveals that on average, geographically smaller countries, such as Hong Kong, Dominica or Jamaica, have a higher damage, there exists a difference between both damage measures, even for the highly exposed countries. These results are line with previous empirical studies. However, as an additional robustness test, I also show a regression where I include these outliers and the results remain unchanged. Springer, Dordrecht, New York, pp 481494, Chapter Section4 presents the main results as well as robustness checks. 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. (2012) use data from EM-DAT as main input for their explanatory variables. Nearly 2 million people have died globally due to tropical cyclones. (2012) demonstrate that only the agricultural sector is negatively affected. However, one disadvantage of the EORA26 data set is that parts of the data are estimated and not measured. I am grateful for comments made by Axel Dreher, Vera Eichenauer, Andreas Fuchs, Lennart Kaplan, Eric Strobl, and Christina Vonnahme. (2012) only differentiate between three sectors: agriculture, manufacturing, and service. 7. The different colors represent different average coefficients, ranging from 0 (light purple) to 0.24 (dark purple). 16 in Appendix A.5. Perhaps the most challenging task is to identify critical sectors that may be responsible for widespread spillover effects leading to substantial modifications in other sectors production input schemes. 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. Earth Syst Sci Data 9(2):927953, Klomp JG, Valckx K (2014) Natural disasters and economic growth: a meta-analysis. J Infrastruct Syst 7(1):112, Hallegatte S, Przyluski V (2010) The economics of natural disasters: concepts and methods. First, I only use the damage fraction due to maximum wind speed of tropical cyclones.
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