Marcel Henkel, Eunjee Kwon, Pierre Magontier, 14 July 2022

The federal government provided $296 billion in disaster relief for catastrophic events in the US between 2001 and 2019. However, excessive bailouts may encourage economic activity to remain in exposed areas. This column shows that increased post-disaster efforts due to political motives result in more people living in hazard-prone coastal regions. A dynamic spatial general equilibrium model predicts that current post-disaster policies improve aggregate welfare at the expense of overall GDP and productivity losses, and encourage sorting into exposed areas.

Guido Alfani, Victoria Gierok, Felix Schaff, 28 January 2022

New evidence is transforming the way we look at long-term trends in economic inequality. This column reconstructs wealth inequality in the German area over five centuries. The significant declines in inequality triggered by the Black Death and again by the Thirty Years’ War of 1618–1648 and the plague that followed provide strong support for the potential levelling effects of catastrophes. However, the much lower mortality rate for Covid-19 suggests we can expect inequality to increase, not to decline, as a consequence of the pandemic.

Natalia Fabra, Massimo Motta, Martin Peitz, 16 September 2020

The COVID-19 crisis has demonstrated the importance of preparing for pandemics and other catastrophic events that require the quick availability of some essential goods and services. Relying only on private incentives and market forces would be insufficient. Instead, governments and preferably supranational institutions should design and implement prevention, detection and mitigation measures. This requires putting in place competitive mechanisms to accumulate essential goods, establishing rationing protocols, and facilitating the ramping up of production when the crisis hits. In particular, public institutions should secure the provision of essential goods in sufficient quantity and quality at a reasonable cost. A new CEPR Policy Insight argues that the economics of electricity capacity markets provides important lessons for such a provision.

John Feddersen, Robert Metcalfe, Mark Wooden, 02 November 2012

Hurricane Sandy destroyed an massive amount of US wealth, but the impact on human wellbeing surely goes far beyond any dollar figure. This column argues that the ‘subjective wellbeing’ literature can inform policy choices in the area of emergency response. Since the ‘happiness’ cost of short-term weather changes far exceeds that of long-term changes, prevention policies are likely to yield a higher payoff in terms of life satisfaction than rebuilding policies with equivalent financial payoffs.

Howard Kunreuther , Erwann Michel-Kerjan, 22 January 2008

Public policies must address large-scale risks that private insurers are unwilling to cover. Here are five economic principles for providing insurance against catastrophes and an evaluation of the US terrorism insurance programme.


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