For example, Miranda etal. 912, while Tables 511 show the regression results. \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 . (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. J Dev Econ 88(2):221231, Onuma H, Shin KJ, Managi S (2020) Short-, medium-, and long-term growth impacts of catastrophic and non-catastrophic natural disasters. From a theoretical perspective, a natural disaster can have both positive and negative effects. 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. It is therefore important to examine their effects over time (Felbermayr and Grschl 2014; Hsiang and Jina 2014). Energy Econ 46:576592, Kruk MC, Knapp KR, Levinson DH (2010) A technique for combining global tropical cyclone best track data. PLoS ONE 14(4):121, Strobl E (2011) The economic growth impact of hurricanes: Evidence from U.S. coastal counties. The cross-sectoral dependence is most pronounced for the manufacturing (D) and other activities (JP)sectoral aggregates. Out of 49 parameter estimates, only 12 are significantly different from zero.Footnote 26 As expected, the heavily damaged agriculture, hunting, forestry, and fishing sector aggregate experiences the most changes. The agriculture, hunting, forestry, and fishing sector aggregate first depicts negative growth rates but then quickly recovers after four years. Originating from a tropical wave over West Africa, Florence quickly organized upon its emergence over the Atlantic Ocean. Econometrica 55(3):703708, Newson R (1998) PARMEST: Stata module to create new data set with one observation per parameter of most recent model. Table 1 presents the results of the main specification for each of the seven annual sectoral GDP per capita growth rates. 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. This behavior most likely speaks for an enduring risk adjustment of tourists. J Monet Econ 43(2):391409, Elliott RJ, Strobl E, Sun P (2015) The local impact of typhoons on economic activity in China: a view from outer space. 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. Significant effects of tropical cyclone damage on InputOutput coefficients. In total, the majority of all sectoral aggregates experience lagged negative growth effects due to tropical cyclones. The storm will likely damage homes. Social impacts TBC homes destroyed. In light of this finding, one could question the reliability of the agricultural weighting scheme for the damage variable. 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. All weights are available in the HYDE 3.2 data set (Klein Goldewijk etal. (2018). Acemoglu D, Carvalho VM, Ozdaglar A, Tahbaz-Salehi A (2012) The network origins of aggregate fluctuations. To identify the causal effects of tropical cyclone intensity on sectoral per capita growth, I use the following set of regression equations, which constitutes my main specifications: where the dependent variable \(Growth_{i,t-1->t}^j\) is the annual value added per capita growth rate of sector j in country i. After one year, we can also detect a positive effect in the construction sector, which is not surprising given the higher number of orders due to reconstruction efforts. In further specifications, I include additional control variables \({\mathbf {Z}}_{i,t-1}\) to account for potential socioeconomic or climatic influences. Additionally, it is unexplained how the sectors are interconnected and if their structural dependence changes. 2023 Springer Nature Switzerland AG. To analyze potential indirect effects which could emerge because of changes in the InputOutput composition of the individual sectors, I test the following set of equations for the different Input(j)Output(k) combinations: where \(IO_{i,t}^{j,k}\) indicates the InputOutput coefficient of sectors j and k in year t and country i. The damaging winds are responsible for serious destruction of buildings and vegetation. It . [2] Between 1979 and 2017, there was a global increase in the proportion of tropical cyclones of Category 3 and higher on the Saffir-Simpson scale. Econ J 122(559):6491, Dell M, Jones BF, Olken BA (2014) What do we learn from the weather? Such data are positively correlated with GDP (Felbermayr and Grschl 2014) and prone to measurement errors (Kousky 2014). As per the guidelines of the World . (Color figure online). Positive effects include, for instance, as a consequence of the destruction of capital, that the marginal productivity of capital increases, making it more attractive to invest in capital in the affected area (Klomp and Valckx 2014). Slider with three articles shown per slide. Since the sample period is reduced to 19902015 due to data availability, I re-estimated the regression model of the main specification 2 for the reduced sample of model 6. 2012). 2014). 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. The storm is expected to affect Duke Energy's 1,870 megawatt (MW) Brunswick and 932MW Harris nuclear plants in North Carolina, as well as potentially the 1,676MW Surry plant in Virginia, owned by Dominion Energy. It demands more input from three other sector aggregates, while the manufacturing sectors use less input from it. World Dev 105:231247, Bertinelli L, Strobl E (2013) Quantifying the local economic growth impact of hurricane strikes: an analysis from outer space for the Caribbean. I also explore the effects on the 26 individual sectors later in this paper. 2013). Rev Environ Econ Policy 13(2):167188, Bulte E, Xu L, Zhang X (2018) Post-disaster aid and development of the manufacturing sector: lessons from a natural experiment in China. 2010). Tropical Cyclone Eloise was the strongest tropical cyclone to impact the country of Mozambique since Cyclone Kenneth in 2019 and the second of three consecutive tropical cyclones to impact Mozambique in the 2020-21 South-West Indian Ocean cyclone season. To allow for the possibility of multiple tropical cyclones per year and country, I conduct two robustness tests. However, an area weight has the disadvantage of including largely unpopulated areas, such as deserts, which are economically meaningless. 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. 2017) at a spatial resolution of around \(10\,\times \,10\)km.Footnote 10 To avoid potential endogeneity concerns, I lag the respective weights by one period. 2632). A tropical cyclone is a low pressure system that develops over tropical waters, characterized by high winds and heavy rain. 7. 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. In total, I exclude five country-year observations from my analysis: Dominican Republic 1979, Grenada 2004, Montserrat 1989, Myanmar 1977, and Saint Lucia 1980. He finds a negative effect for the ISIC sectors agriculture, hunting, forestry, and fishing (A&B), mining, and utilities (C&E), wholesale, retail trade, restaurants, and hotels (GH), but a positive effect for the construction sector (F). For example, Hsiang (2010) finds an immediate positive response of the construction sector. Therefore, I include the mean level of temperature and precipitation as additional climate controls in a further specification. 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. 2020). \(Damage_{i,t}\) is the derived damage function for country i at year t from Eq. Stagnant water can cause the spread of disease, and transportation or communication infrastructure may have been destroyed, hampering clean-up and rescue efforts. Additionally, I cluster the standard errors at broader regional levels as a further robustness test. This change can be regarded as reconstruction efforts, which is also reflected in the relatively rapid recovery of the agricultural sector aggregate in Fig. Furthermore, only a minority of studies explicitly investigate the disasters influences on sectoral economic development. Latent Heat and Its Impact on Tropical Cyclones. Additionally, it has been shown, that low- and middle-income countries seem to be more vulnerable to the negative impacts of natural disasters than high-income countries (Felbermayr and Grschl 2014; Berlemann and Wenzel 2018). Cyclone Eloise. The other proportional shares on total GDP are: Wholesale, retail trade, restaurants, hotels (15%); agriculture, hunting, forestry, fishing (14%); mining and utilities (10%); transport, storage, communication (8%). Since climatological impacts are most likely nonlinear, I also include squared precipitation and temperature in a further robustness test. This is a well-established method (Strobl 2012; Heinen etal. 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. Further details on the data on tropical cyclones can be found in Appendix A.1. 2014). (2012) only differentiate between three sectors: agriculture, manufacturing, and service. Econ Inquiry 46(2):214226, de Mel S, McKenzie D, Woodruff C (2012) Enterprise recovery following natural disasters. 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. This allows me to analyze whether any key sectors exist that, if damaged, result in direct damage of other sectors. 2018) or exposed area (Hsiang and Jina 2014) to weight the respective physical intensities of tropical cyclones. This allows me to identify which of the competing hypothesesbuild-back-better, recovery to trend, or no recoveryis appropriate for which sector. For example, Loayza etal. I also tested for lagged cumulative effects. https://unstats.un.org/unsd/snaama/Metadata/Glossary#, United Nations Statistical Division (2015b) Methodology for the national accounts main aggregates database. Further losses can occur if business continuity is lost through disrupted supply of intermediate inputs from, or distribution to, other businesses. High levels of moisture in the air and low wind sheer formed showers and thunderstorms. Hurricane Florence was a powerful and long-lived Cape Verde hurricane that caused catastrophic damage in the Carolinas in September 2018, primarily as a result of freshwater flooding due to torrential rain. J Dev Econ 97(1):130141, Terry JP (2007) Tropical cyclones: climatology and impacts in the South Pacific. J Afr Econ 17(Supplement2):ii7ii49, Cole MA, Elliott RJR, Okubo T, Strobl E (2019) Natural disasters and spatial heterogeneity in damages: the birth, life and death of manufacturing plants. 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. For the latitude and longitude the model takes a spline interpolation, whereas for intensity and time observations it uses a linear interpolation. Evidence from developing countries. Finally, the standard errors \(\epsilon _{i,t}\) could be biased by the autocorrelation of unobservable omitted variables (Hsiang 2016). The sample period hence reduces to 19712015. Additionally, it seems that the fishing sector is responsible for the negative supply shock in the agriculture, hunting, forestry, and fishing sector aggregate. In a similar manner, Mohan and Strobl (2017) find evidence that a positive growth effect of the construction sector, financed by international aid or government programs, lead to a fast recovery of South-Pacific Islands after tropical cyclones.Footnote 27, Significant effects of tropical cyclone damage on disaggregated InputOutput coefficients. How did the tropical cyclone impact the people communities? Moody's estimates that the property loss and direct damages from Hurricane Florence will total $17-22 billion, making it one of the top 10 costliest natural disasters in US history. To view a copy of this licence, visit http://creativecommons.org/licenses/by/4.0/. Moreover, extreme damaging tropical cyclones are relatively rare. Ann Rev Resour Econ 8(1):4375, Hsiang SM, Jina AS (2014) The causal effect of environmental catastrophe on long-run economic growth: evidence from 6,700 cyclones. There are two important points to note about this tropical cyclone damage variable. I am grateful for comments made by Axel Dreher, Vera Eichenauer, Andreas Fuchs, Lennart Kaplan, Eric Strobl, and Christina Vonnahme. Flooding could prove devastating. Anyone you share the following link with will be able to read this content: Sorry, a shareable link is not currently available for this article. Notes This figure shows the significant effects of a one standard deviation increase in tropical cyclone damage on the respective InputOutput coefficient. Sept. 16: Some areas receive as much as 34 inches of rain from Sept. 13 to Sept. 16. Therefore, I propose a new damage measure that explicitly considers these different exposures. (2020) provide evidence that after hurricane strikes in Central America, a short-term negative growth period (12months) is compensated by a positive recovery in the second year. Country-year observations above two standard deviations are labeled with the respective ISO3 code. Once the surface winds have reached a maximum sustained speed of 39 mph (63 km/h), it is classified as a tropical storm. To implement the Fisher randomization test, I use the code generated by He (2017) and randomly permute the years of the tropical cyclone damage variable for 2000 repetitions. The analysis of the past influences of tropical cyclone damage demonstrates that the sectoral growth response following a tropical cyclone is a complex undertaking. Likewise, the contemporaneous, non-significant effect for the remaining sectors can be explained as a result of lower vulnerability and/or efficient recovery measures, which attenuate the potentially negative effect of tropical cyclones. Economica 25(97):5864, Grger A, Zylberberg Y (2016) Internal labor migration as a shock coping strategy: evidence from a typhoon. Before 2000, only decadal data are available. Gross value added is defined by the UNSD as the value of output less the value of intermediate consumption (United Nations Statistical Division 2015a). Resembling large whirlpools, they are made up of rotating, moist air, with wind speeds that can reach over 120 km/h. Pictured: The East Coast of the U.S. and the Gulf of Mexico viewed by satellite as Hurricane Florence made landfall on September 14. Consequently, \(\beta ^j\) is the coefficient of main interest in this specification. 16 in Appendix A.5. This corresponds to a mean annual global loss of USD 16.7 billion (measured in constant 2005 USD) for the sample average. However, we still can learn from this analysis of how certain direct effects evolve. Since the commonly used report-based EM-DAT data set (Lazzaroni and van Bergeijk 2014) has been criticized for measurement errors (Kousky 2014), endogeneity, and reverse causality problems (Felbermayr and Grschl 2014), I use meteorological data on wind speeds to generate a proxy for the destructive power of tropical cyclones.Footnote 3 This approach is in line with previous empirical studies (e.g., Hsiang 2010; Strobl 2011, 2012), but I advance this literature by generating a sector-specific damage function. I take advantage of the International Best Track Archive for Climate Stewardship (IBTrACS) provided by the National Oceanic and Atmospheric Administration (Knapp etal. One reason could be that the destruction of productive capital outweighs the higher number of orders. This heat is the energy that is released or absorbed during a phase change in water. 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}. To underline the credibility of my regression analyses, I test the sensitivity of my results in various ways. 2019). volume78,pages 545569 (2021)Cite this article. However, the InputOutput analysis shows that production processes are sticky and indirect economic effects are limited. Freddy has finally been declared over by the French Meteorological service. Stata J 17(3):630651, Holland GJ (1980) An analytic model of the wind and pressure profiles in hurricanes. Figure 6 demonstrates that three out of seven sectoral aggregates suffer from delayed negative impacts of tropical cyclones. The new climate-economy literature. The storm damaged and destroyed famand, vital infrastructure and thousands of homes, dealing another devastating blow to families still trying to put their lives together after. In terms of total losses, this decrease results in a mean yearly loss of USD \(-\,16.7\) billion (measured in constant 2005 USD) for the sample average (USD 5.63 billion). \end{array}\right. } 1315 show the cumulative results for different lag lengths (5, 10, 15), and Tables 1315 exhibit the underlying estimations. J Infrastruct Syst 7(1):112, Hallegatte S, Przyluski V (2010) The economics of natural disasters: concepts and methods. Additionally, Cole etal. Thus, tropical cyclones are and will continue to be a serious threat to the life and assets of a large number of people worldwide. This index is then multiplied by the cubed maximum wind speed \(S(max)_{g,t}^{3}\) in grid g and year t as calculated by Eq. 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. To be consistent with the remaining analysis, I aggregate the given 26 sectors to the previously used seven sectoral aggregates.Footnote 14 For my analysis, I calculate the InputOutput coefficients by dividing the specific input of each sector by the total input of each sector given in the transaction matrix of the data: The resulting InputOutput coefficients \(IO^{j,k}\) range between 0 and 1 in year t. They indicate how much input from sector k is needed to produce one unit of output of sector j. Consequently, the InputOutput coefficients give an idea of the structural interactions of sectors within an economy and hence help to disentangle the indirect effects of tropical cyclone damage.Footnote 15. WMO continues to monitor the "remarkable" tropical storm, which has cut a destructive path across . Wilmington remained cut off for at least a week following Hurricane Florence delaying the distribution of food, water and . 4. By doing so, I test the null-hypothesis of no effect of the damage variable. 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. How did the tropical cyclone impact the people communities? 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). Appendix Table 43 and 54 show that the results remain qualitatively unchanged. Appendix A.5 presents further statistics: Figs. 5. 2019), Felbermayr and Grschl (2014) show that storms from the previous fiveyears can also have a negative growth effect. 2018; Elliott etal. First, I account for the economic exposure by weighting the maximum occurred wind speed per grid cell and year by the number of exposed people living in that grid cell relative to the total population of the country. In contrast to Eq. I further thank seminar participants at Heidelberg University (2016), the AERE Summer Conference in Breckenridge (6/2016), the EAERE Meeting in Zurich (06/2016), the BBQ Workshop in Salzburg (07/2016), the Geospatial Analysis of Disasters: Measuring Welfare Impacts of Emergency Relief Workshop in Heidelberg (07/2016), the Oeschger Climate Summer School in Grindelwald (08/2016), the Conference on Econometric Models of Climate Change in Oxford (9/2017), the Impacts World Conference in Potsdam (10/2017), and the 8th Annual Interdisciplinary Ph.D. Workshop in Sustainable Development at Columbia University (04/2018). Mohan (2017) provides further evidence that in Caribbean countries agricultural crops are more severely affected by hurricanes compared to livestock. 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. This assumption is relaxed in further specifications by allowing more flexible country-specific trends (e.g., squared). However, it has been demonstrated that this bias can be neglected if the panel is longer than 15 time periods (Dell etal. Open Access funding enabled and organized by Projekt DEAL. This finding clearly opposes the build-back-better hypothesis as well as the recovery to trend hypothesis. The most interesting changes can be observed within the single sectors of the manufacturing (D) aggregate. 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. PubMedGoogle Scholar. The authors find that after the 2008 Wenchuan Earthquake neighboring counties suffer from indirect negative growth effects due to changes within the manufacturing sectors. Tropical cyclones can have devastating economic consequences. 4. 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. Depending on the level of aggregation, I run 49 (7*7) or 676 (26*26) different regressions. (2012) use data from EM-DAT as main input for their explanatory variables. Bakkensen LA, Park D-SR, Sarkar RSR (2018) Climate costs of tropical cyclone losses also depend on rain. Economic sectors most vulnerable to direct capital destruction of tropical cyclones must be identified. Econ Lett 94(1):2025, United Nations Statistical Division (2015a). Moreover, I include time fixed effects \(\delta _t\) to account for time trends and other events common to all countries in the sample. Environ Res Lett 13(7):074034. 2012), recent empirical studies focus on the shock propagation in production networks within the United States of America (Barrot & Sauvagnat 2016) or after single natural disasters, such as the 2011 earthquake in Japan (Boehm etal. 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. In: Bobrowsky PT (ed) Encyclopedia of natural hazards. Circle diameters represent the average proportional share on total GDP ranging from 32% (other activities), over 12% (manufacturing) to 6% (construction).Footnote 25. Part of Springer Nature. J Environ Econ Manag 98:102252, Elsner JB, Kossin JP, Jagger TH (2008) The increasing intensity of the strongest tropical cyclones. As climate change is warming ocean temperatures, there is potentially more of this fuel available. 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. Tropical cyclones cause widespread damage in specific regions as a result of high winds and flooding. Rev Environ Econ Policy 7(2):181198, Aznar-Siguan G, Bresch DN (2019) CLIMADA v1: a global weather and climate risk assessment platform. Sven Kunze. 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. 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.