Destruction, Disinvestment, and Death: Economic and Human Losses Following Environmental Disaster

The immediate physical damages caused by environmental disasters are conspicuous and often the focus of media and government attention. In contrast, the nature and magnitude of post-disaster losses remain largely unknown because they are not easily observable. Here we exploit annual variation in the incidence of typhoons (West-Pacific hurricanes) to identify post-disaster losses within Filipino households. We find that unearned income and excess infant mortality in the year after typhoon exposure outnumber immediate damages and death tolls roughly 15-to-1. Typhoons destroy durable assets and depress incomes, leading to broad expenditure reductions achieved in part through disinvestments in health and human capital. Infant mortality mirrors these economic responses, and additional findings – that only female infants are at risk, that sibling competition elevates risk, and that infants conceived after a typhoon are also at risk – indicate that this excess mortality results from household decisions made while coping with post-disaster economic conditions. We estimate that these posttyphoon “economic deaths” constitute 13% of the overall infant mortality rate in the Philippines. Taken together, these results indicate that economic and human losses due to environmental disaster may be an order of magnitude larger than previously thought and that adaptive decision-making may amplify, rather than dampen, disasters’ social cost. JEL Codes: J13, O12, Q54, Q56. ∗We thank Douglas Almond, Chris Barrett, Scott Barrett, Marshall Burke, Mark Cane, Janet Currie, Tatyana Deryugina, Ram Fishman, Joshua Graff Zivin, Michael Hanemann, Rema Hanna, Kyle Meng, Gordon McCord, John Mutter, Suresh Naidu, Daiju Narita, Nicole Ngo, Michael Oppenheimer, Cristian Pop-Eleches, Jeffrey Sachs, Bernard Salanié, Nicholas Sanders, Wolfram Schlenker, Kerry Smith, Reed Walker and seminar participants at Columbia, Cornell, Harvard, Princeton, UC Berkeley, UC San Diego, University of San Francisco, the NBER Summer Institute, the NBER HC/EEE Fall Meeting, the Advanced Graduate Workshop on Poverty, Development and Globalization and the American Geophysical Union Fall Meeting for helpful comments and suggestions. We thank Vincent Olaivar of the National Statistics Office of the Philippines for assistance obtaining data. This work is funded in part by a grant from the Center for International Business Education and Research; J.K.A.H. was funded by an IGERT grant from the National Science Foundation, S.M.H. was funded by STAR Research Grant (FP-916932) from the US Environmental Protection Agency, and Postdoctoral Fellowships in Applied Econometrics (NBER) and Science, Technology & Environmental Policy (Princeton). This version: February 18, 2013. †Corresponding author: 2130 Fulton St., Department of Economics, Cowell 407, San Francisco, CA 94117. Phone: (415) 422-6453. Fax: (415) 422-6983. Email:[email protected]