Wealth and income effects of natural disasters: an econometric analysis of Hurricane Hugo

Abstract

Following natural disasters, many regions face substantial losses of wealth. Some sectors experience temporary gains in economic activity as a result of insurance claims and other short-term income flows. This paper examines the economic gains and losses from Hurricane Hugo in South Carolina. The analysis is based on a multi-sector regional econometric model, which allows us to examine the state's economy "with and without' the storm. We first obtained estimates based on pre-Hugo period data. We simulated the state's economy in the post-Hugo period based on the actual values of national economic variables during the reconstruction period - yielding the "without' storm estimates. The income gains were neutral overall, despite a major surge in some sectors. Even in these sectors, the economic gain remained below the unreimbursed wealth loss. The catastrophe had a net negative economic effect. -from Authors