Dealing with Increased Risk of Natural Disasters: Challenges and Options

By Michael Keen, Paul K. Freeman, Muthukumara Mani

October 1, 2003

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Format: Chicago

Michael Keen, Paul K. Freeman, and Muthukumara Mani. Dealing with Increased Risk of Natural Disasters: Challenges and Options, (USA: International Monetary Fund, 2003) accessed November 23, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

Natural disaster risk is emerging as an increasingly important constraint on economic development and poverty reduction. This paper first sets out the key stylized facts in the area-that the costs of disaster have been increasing, seem set to continue to increase, and bear especially heavily on the poorest. It then reviews the key economic issues at stake, focusing in particular on the actual and prospective roles of, and interaction between, market instruments and public interventions in dealing with disaster risk. Key sources of market failure include the difficulty of risk spreading and, perhaps even more fundamental, the Samaritan's dilemma: the underinvestment in protective measures associated with the rational expectation that others will provide support if disaster occurs. Innovations addressing each of these are discussed.

Subject: Climate change, Environment, Financial institutions, Government debt management, Insurance, Insurance companies, Natural disasters, Public financial management (PFM)

Keywords: A number of country, Adverse selection, B. low-income country, Balance of payments, Cash-strapped government, Climate Change, Developed country, Developing Countries, Emergency management fund, Global, Government budget balance, Government debt management, Government expenditure, Government of China, Insurance, Insurance companies, Insurance market, Island state, Market failure, Natural Disasters, Private sector, Urbanization, WP

Publication Details

Pages:

38
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2003/197
Stock No:

WPIEA1972003
ISBN:

9781451860030
ISSN:

1018-5941

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