High Consumption Volatility : The Impact of Natural Disasters?

A history of repeated external and domestic shocks has made economic insecurity a major concern across the Caribbean region. Of particular concern to all households, especially the poorest segments of the population, is the exposure to shocks that...

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Main Author:	Auffret, Philippe
Format:	Policy Research Working Paper
Language:	English en_US
Published:	World Bank, Washington, DC 2014
Subjects:	AGRICULTURAL PRODUCTION AGRICULTURE ARABLE LAND AVERAGE CONSUMPTION AVERAGE GROWTH BALANCE OF PAYMENTS CONCEPTUAL FRAMEWORK CONSUMPTION GROWTH CONSUMPTION PER CAPITA CONSUMPTION SMOOTHING CONSUMPTION VOLATILITY COUNTRY SIZE DAMAGES DEPENDENT VARIABLE DEVELOPED COUNTRIES DEVELOPED ECONOMIES ECONOMIC DEVELOPMENT ECONOMIC GROWTH ECONOMIC LOSS ECONOMIC POLICY ECONOMIC SECTORS ECONOMIC THEORY ECONOMIC WELFARE ECONOMIES OF SCALE EMPIRICAL EVIDENCE EQUILIBRIUM EXOGENOUS VARIABLES EXPECTED UTILITY EXPLANATORY VARIABLE EXPLANATORY VARIABLES EXPORTS EXTERNAL SHOCKS FARMS FINANCIAL DEPTH FINANCIAL MARKETS FISCAL POLICY FOOD CONSUMPTION GDP GENERAL EQUILIBRIUM MODEL GROWTH RATES HISTORICAL DATA HUMAN CAPITAL IMPORTS INCOME INDUSTRIAL ECONOMIES INFLATION INFLATION RATE INSURANCE INSURANCE MARKETS INSURANCE PREMIUMS INVERSE RELATIONSHIP M2 MACROECONOMIC POLICIES MACROECONOMIC VARIABLES NEGATIVE EFFECT NEGATIVE IMPACT NET EXPORTS NORMAL DISTRIBUTION 0 HYPOTHESIS PER CAPITA CONSUMPTION PER CAPITA CONSUMPTION GROWTH PER CAPITA INCOME POLICY RESEARCH POSITIVE ROLE PRECIPITATION PRIVATE CONSUMPTION PUBLIC CONSUMPTION PUBLIC EXPENDITURES PUBLIC GOODS PUBLIC INVESTMENT PUBLIC SECTOR RISK AVERSION RISK MANAGEMENT SMALL BUSINESS TAX REVENUES TERMS OF TRADE TOTAL CONSUMPTION TRADE SHOCKS UTILITY FUNCTION
Online Access:	http://documents.worldbank.org/curated/en/2003/01/2128868/high-consumption-volatility-impact-natural-disasters http://hdl.handle.net/10986/19169

id	okr-10986-19169
recordtype	oai_dc
spelling	okr-10986-191692021-04-23T14:03:42Z High Consumption Volatility : The Impact of Natural Disasters? Auffret, Philippe AGRICULTURAL PRODUCTION AGRICULTURE ARABLE LAND AVERAGE CONSUMPTION AVERAGE GROWTH BALANCE OF PAYMENTS CONCEPTUAL FRAMEWORK CONSUMPTION GROWTH CONSUMPTION PER CAPITA CONSUMPTION SMOOTHING CONSUMPTION VOLATILITY COUNTRY SIZE DAMAGES DEPENDENT VARIABLE DEVELOPED COUNTRIES DEVELOPED ECONOMIES ECONOMIC DEVELOPMENT ECONOMIC GROWTH ECONOMIC LOSS ECONOMIC POLICY ECONOMIC SECTORS ECONOMIC THEORY ECONOMIC WELFARE ECONOMIES OF SCALE EMPIRICAL EVIDENCE EQUILIBRIUM EXOGENOUS VARIABLES EXPECTED UTILITY EXPLANATORY VARIABLE EXPLANATORY VARIABLES EXPORTS EXTERNAL SHOCKS FARMS FINANCIAL DEPTH FINANCIAL MARKETS FISCAL POLICY FOOD CONSUMPTION GDP GENERAL EQUILIBRIUM MODEL GROWTH RATES HISTORICAL DATA HUMAN CAPITAL IMPORTS INCOME INDUSTRIAL ECONOMIES INFLATION INFLATION RATE INSURANCE INSURANCE MARKETS INSURANCE PREMIUMS INVERSE RELATIONSHIP M2 MACROECONOMIC POLICIES MACROECONOMIC VARIABLES NEGATIVE EFFECT NEGATIVE IMPACT NET EXPORTS NORMAL DISTRIBUTION 0 HYPOTHESIS PER CAPITA CONSUMPTION PER CAPITA CONSUMPTION GROWTH PER CAPITA INCOME POLICY RESEARCH POSITIVE ROLE PRECIPITATION PRIVATE CONSUMPTION PUBLIC CONSUMPTION PUBLIC EXPENDITURES PUBLIC GOODS PUBLIC INVESTMENT PUBLIC SECTOR RISK AVERSION RISK MANAGEMENT SMALL BUSINESS TAX REVENUES TERMS OF TRADE TOTAL CONSUMPTION TRADE SHOCKS UTILITY FUNCTION A history of repeated external and domestic shocks has made economic insecurity a major concern across the Caribbean region. Of particular concern to all households, especially the poorest segments of the population, is the exposure to shocks that are generated by catastrophic events or natural disasters. The author shows that despite high consumption growth, the Caribbean region suffers from a high volatility of consumption that decreases household welfare. After presenting some empirical evidence that consumption volatility is higher in the Caribbean region than in the rest of the world, he makes some empirically testable inferences that help explain consumption volatility. The author develops a conceptual framework for analyzing the effects of catastrophic events on household and aggregate welfare. According to this framework, the volatility of consumption comes from production shocks that are transformed into consumption shocks mostly because of underdeveloped or ineffective risk-management mechanisms. Auffret conducts an empirical analysis of the impact of catastrophic events on 16 countries (6 from the Caribbean region and 10 from Latin America) from 1970-99 and shows that catastrophic events lead to: 1) A substantial decline in the growth of output. 2) A substantial decline in the growth of investment. 3) A more moderate decline in consumption growth (most of the decline is in private consumption, while public consumption declines moderately. 4) A worsening of the current account of the balance of payments. 2014-08-01T15:21:46Z 2014-08-01T15:21:46Z 2003-01 http://documents.worldbank.org/curated/en/2003/01/2128868/high-consumption-volatility-impact-natural-disasters http://hdl.handle.net/10986/19169 English en_US Policy Research Working Paper;No. 2962 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research Latin America & Caribbean
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	English en_US
topic	AGRICULTURAL PRODUCTION AGRICULTURE ARABLE LAND AVERAGE CONSUMPTION AVERAGE GROWTH BALANCE OF PAYMENTS CONCEPTUAL FRAMEWORK CONSUMPTION GROWTH CONSUMPTION PER CAPITA CONSUMPTION SMOOTHING CONSUMPTION VOLATILITY COUNTRY SIZE DAMAGES DEPENDENT VARIABLE DEVELOPED COUNTRIES DEVELOPED ECONOMIES ECONOMIC DEVELOPMENT ECONOMIC GROWTH ECONOMIC LOSS ECONOMIC POLICY ECONOMIC SECTORS ECONOMIC THEORY ECONOMIC WELFARE ECONOMIES OF SCALE EMPIRICAL EVIDENCE EQUILIBRIUM EXOGENOUS VARIABLES EXPECTED UTILITY EXPLANATORY VARIABLE EXPLANATORY VARIABLES EXPORTS EXTERNAL SHOCKS FARMS FINANCIAL DEPTH FINANCIAL MARKETS FISCAL POLICY FOOD CONSUMPTION GDP GENERAL EQUILIBRIUM MODEL GROWTH RATES HISTORICAL DATA HUMAN CAPITAL IMPORTS INCOME INDUSTRIAL ECONOMIES INFLATION INFLATION RATE INSURANCE INSURANCE MARKETS INSURANCE PREMIUMS INVERSE RELATIONSHIP M2 MACROECONOMIC POLICIES MACROECONOMIC VARIABLES NEGATIVE EFFECT NEGATIVE IMPACT NET EXPORTS NORMAL DISTRIBUTION 0 HYPOTHESIS PER CAPITA CONSUMPTION PER CAPITA CONSUMPTION GROWTH PER CAPITA INCOME POLICY RESEARCH POSITIVE ROLE PRECIPITATION PRIVATE CONSUMPTION PUBLIC CONSUMPTION PUBLIC EXPENDITURES PUBLIC GOODS PUBLIC INVESTMENT PUBLIC SECTOR RISK AVERSION RISK MANAGEMENT SMALL BUSINESS TAX REVENUES TERMS OF TRADE TOTAL CONSUMPTION TRADE SHOCKS UTILITY FUNCTION
spellingShingle	AGRICULTURAL PRODUCTION AGRICULTURE ARABLE LAND AVERAGE CONSUMPTION AVERAGE GROWTH BALANCE OF PAYMENTS CONCEPTUAL FRAMEWORK CONSUMPTION GROWTH CONSUMPTION PER CAPITA CONSUMPTION SMOOTHING CONSUMPTION VOLATILITY COUNTRY SIZE DAMAGES DEPENDENT VARIABLE DEVELOPED COUNTRIES DEVELOPED ECONOMIES ECONOMIC DEVELOPMENT ECONOMIC GROWTH ECONOMIC LOSS ECONOMIC POLICY ECONOMIC SECTORS ECONOMIC THEORY ECONOMIC WELFARE ECONOMIES OF SCALE EMPIRICAL EVIDENCE EQUILIBRIUM EXOGENOUS VARIABLES EXPECTED UTILITY EXPLANATORY VARIABLE EXPLANATORY VARIABLES EXPORTS EXTERNAL SHOCKS FARMS FINANCIAL DEPTH FINANCIAL MARKETS FISCAL POLICY FOOD CONSUMPTION GDP GENERAL EQUILIBRIUM MODEL GROWTH RATES HISTORICAL DATA HUMAN CAPITAL IMPORTS INCOME INDUSTRIAL ECONOMIES INFLATION INFLATION RATE INSURANCE INSURANCE MARKETS INSURANCE PREMIUMS INVERSE RELATIONSHIP M2 MACROECONOMIC POLICIES MACROECONOMIC VARIABLES NEGATIVE EFFECT NEGATIVE IMPACT NET EXPORTS NORMAL DISTRIBUTION 0 HYPOTHESIS PER CAPITA CONSUMPTION PER CAPITA CONSUMPTION GROWTH PER CAPITA INCOME POLICY RESEARCH POSITIVE ROLE PRECIPITATION PRIVATE CONSUMPTION PUBLIC CONSUMPTION PUBLIC EXPENDITURES PUBLIC GOODS PUBLIC INVESTMENT PUBLIC SECTOR RISK AVERSION RISK MANAGEMENT SMALL BUSINESS TAX REVENUES TERMS OF TRADE TOTAL CONSUMPTION TRADE SHOCKS UTILITY FUNCTION Auffret, Philippe High Consumption Volatility : The Impact of Natural Disasters?
geographic_facet	Latin America & Caribbean
relation	Policy Research Working Paper;No. 2962
description	A history of repeated external and domestic shocks has made economic insecurity a major concern across the Caribbean region. Of particular concern to all households, especially the poorest segments of the population, is the exposure to shocks that are generated by catastrophic events or natural disasters. The author shows that despite high consumption growth, the Caribbean region suffers from a high volatility of consumption that decreases household welfare. After presenting some empirical evidence that consumption volatility is higher in the Caribbean region than in the rest of the world, he makes some empirically testable inferences that help explain consumption volatility. The author develops a conceptual framework for analyzing the effects of catastrophic events on household and aggregate welfare. According to this framework, the volatility of consumption comes from production shocks that are transformed into consumption shocks mostly because of underdeveloped or ineffective risk-management mechanisms. Auffret conducts an empirical analysis of the impact of catastrophic events on 16 countries (6 from the Caribbean region and 10 from Latin America) from 1970-99 and shows that catastrophic events lead to: 1) A substantial decline in the growth of output. 2) A substantial decline in the growth of investment. 3) A more moderate decline in consumption growth (most of the decline is in private consumption, while public consumption declines moderately. 4) A worsening of the current account of the balance of payments.
format	Publications & Research :: Policy Research Working Paper
author	Auffret, Philippe
author_facet	Auffret, Philippe
author_sort	Auffret, Philippe
title	High Consumption Volatility : The Impact of Natural Disasters?
title_short	High Consumption Volatility : The Impact of Natural Disasters?
title_full	High Consumption Volatility : The Impact of Natural Disasters?
title_fullStr	High Consumption Volatility : The Impact of Natural Disasters?
title_full_unstemmed	High Consumption Volatility : The Impact of Natural Disasters?
title_sort	high consumption volatility : the impact of natural disasters?
publisher	World Bank, Washington, DC
publishDate	2014
url	http://documents.worldbank.org/curated/en/2003/01/2128868/high-consumption-volatility-impact-natural-disasters http://hdl.handle.net/10986/19169
_version_	1764439238741327872

High Consumption Volatility : The Impact of Natural Disasters?

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