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Estimating the Economic Impact of Governance in Disaster Risk Management: Theory and Evidence from Latin America and the Caribbean

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  • Guerrero Compeán, Roberto
  • Zegarra Méndez, Eduardo
  • Lacambra Ayuso, Sergio

Abstract

Strengthened governance is crucial to reduce economic risks associated with disasters, but little is known about its impact. We combine a new dataset on disaster risk management governance for 26 countries from the Latin America and Caribbean region with annual information on economic losses resulting from disasters between 1980 and 2016. To account for endogenous disaster risk management (DRM) governance processes, we exploit the fact that changes in DRM regulatory frameworks affect a country's capacity for disaster risk identification and reduction to provide instrumental variable estimates of their impact. We find that disasters cause substantial economic losses and that a more robust governance for disaster risk resilience to economic losses reduces the expected economic toll caused by natures shocks. Our estimates suggest that the improvement of DRM governance in Latin America and the Caribbean mitigate the economic toll of disasters, especially in a context where climate change leads to the occurrence of more frequent and severe natural hazards across the region.

Suggested Citation

  • Guerrero Compeán, Roberto & Zegarra Méndez, Eduardo & Lacambra Ayuso, Sergio, 2024. "Estimating the Economic Impact of Governance in Disaster Risk Management: Theory and Evidence from Latin America and the Caribbean," IDB Publications (Working Papers) 13659, Inter-American Development Bank.
  • Handle: RePEc:idb:brikps:13659
    DOI: http://dx.doi.org/10.18235/0013046
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    More about this item

    Keywords

    Disaster Risk Resilience; governance; economic losses; Latin America and the Caribbean;
    All these keywords.

    JEL classification:

    • O54 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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