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The Social Value of Hurricane Forecasts

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Listed:
  • Renato Molina
  • Ivan Rudik

Abstract

What is the impact and value of hurricane forecasts? We study this question using newly-collected forecast data for major US hurricanes since 2005. We find higher wind speed forecasts increase pre-landfall protective spending, but erroneous under-forecasts increase post-landfall damage and rebuilding expenditures. Our main contribution is a new theoretically-grounded approach for estimating the marginal value of forecast improvements. We find that the average annual improvement reduced total per-hurricane costs, inclusive of unobserved protective spending, by $700,000 per county. Improvements since 2007 reduced costs by 19%, averaging $5 billion per hurricane. This exceeds the annual budget for all federal weather forecasting.

Suggested Citation

  • Renato Molina & Ivan Rudik, 2024. "The Social Value of Hurricane Forecasts," NBER Working Papers 32548, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:32548
    Note: EEE PE
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    More about this item

    JEL classification:

    • 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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