The Local Impact of Typhoons on Economic Activity in China: A View from Outer Space

We examine the impact of typhoons on local economic activity in coastal China. To capture potential damages from an individual typhoon we use historical typhoon track data in conjunction with a detailed wind-field model. We then combine our damage proxy with satellite derived nightlight intensity data to contact a panel data set that allows us to estimate the impact of typhoons at a spatially highly disaggregated level (approx. 1km). Our results show that typhoons have a negative and significant, but short term, impact on local activity - a typhoon that is estimated to destroy 50% of the property reduces local economic activity by 20% for that year. Over our period of analysis (1992-2010) total net economic losses are estimated to be in the region of US$28.34 billion. To assess the damage risk from future typhoons we use simulated probability distributions of typhoon occurrence and intensity and combine these with our estimated effects. Results suggest that expected annual losses are likely to be around US$0.54 billion.