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Author Martin, Ian, 1976- author.

Title Welfare costs of catastrophes : lost consumption and lost lives / Ian W.R. Martin, Robert S. Pindyck
Published Cambridge, Mass. : National Bureau of Economic Research, 2019


Description 1 online resource (28 pages) : illustrations
Series NBER working paper series ; no. 26068
Working paper series (National Bureau of Economic Research) ; no. 26068.
Summary Most of the literature on the economics of catastrophes assumes that such events cause a reduction in the stream of consumption, as opposed to widespread fatalities. Here we show how to incorporate death in a model of catastrophe avoidance, and how a catastrophic loss of life can be expressed as a welfare-equivalent drop in wealth or consumption. We examine how potential fatalities affect the policy interdependence of catastrophic events and "willingness to pay" (WTP) to avoid them. Using estimates of the "value of a statistical life" (VSL), we find the WTP to avoid major pandemics, and show it is large (10% or more of annual consumption) and partly driven by the risk of macroeconomic contractions. Likewise, the risk of pandemics significantly increases the WTP to reduce consumption risk. Our work links the VSL and consumption disaster literatures
Notes "July 2019."
Bibliography Includes bibliographical references (pages 25-28)
Notes Online resource; title from viewed July 16, 2019
Subject Disasters -- Economic aspects
Life -- Valuation -- Economic aspects
Consumption (Economics)
Consumption (Economics)
Disasters -- Economic aspects.
Government Policy.
Environmental Economics.
National Government Expenditures and Related Policies.
Criteria for Decision-Making under Risk and Uncertainty.
Form Electronic book
Author Pindyck, Robert S., author.
National Bureau of Economic Research, publisher.