Developing a Global Method for Normalizing Economic Loss from Natural Disasters
Publication: Natural Hazards Review
Volume 23, Issue 1
Abstract
Our understanding of past natural catastrophes has important implications for catastrophe modeling and disaster risk management, mitigation, and adaptation. To assess past events, loss “normalization” is used to isolate natural and economic factors contributing to economic losses. Conventional normalization adjusts for changes in economic activity using the value of capital stock or gross domestic product (GDP). Due to the limited international availability of capital stock data, most global studies elect to use GDP. However, capital stock may be preferable because it directly measures the value of damageable physical assets. In this study, we present a method for global catastrophe loss normalization using capital stock, and apply this method to normalize hurricane disaster losses in the United States. We assess the robustness of our normalization method by comparing losses to losses derived using public capital stock and GDP data. We find that normalized losses are consistent with losses derived using other measures for capital stock and GDP.
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Data Availability Statement
Some or all data, models, or code used during the study were provided by a third party. Third-party data include economic data (gross domestic product, gross fixed capital investment, current-cost net stock of fixed assets and consumer durable goods) and damage loss estimates from US hurricanes. Direct requests for these materials may be made to the provider as indicated in the Acknowledgments. Some or all data, models, or code that support the findings of this study are available from the corresponding author upon reasonable request. Normalized loss estimates from US hurricanes are available from the corresponding author.
Acknowledgments
The manuscript was prepared by Anthony Hanson, Brian Alstadt, and Austin Nijhuis. All authors were responsible for the conception and design of the work. Brian Alstadt and Austin Nijhuis were responsible for data collection and analysis. Austin Nijhuis drafted the article. Anthony Hanson and Brian Alstadt provided critical revision and editing of the article. Economic data used in this study for the United States were obtained by the US Bureau of Economic Analysis. Outside of the US, economic data were obtained from the United Nations and the Organisation for Economic Co-operation and Development. Base damage loss estimates from US hurricanes were obtained from Weinkle et al. (2018) (see Supplemental Materials).
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Published In
Natural Hazards Review
Volume 23 • Issue 1 • February 2022
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This work is made available under the terms of the Creative Commons Attribution 4.0 International license, https://creativecommons.org/licenses/by/4.0/.
History
Received: Jan 4, 2021
Accepted: Aug 16, 2021
Published online: Nov 10, 2021
Published in print: Feb 1, 2022
Discussion open until: Apr 10, 2022
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