The Economic and Policy Consequences of Catastrophes
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Pindyck_The economic.pdf
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632.45 KB
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Adobe PDF
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Author(s)
Pindyck, Robert S.
Wang, Neng
Date Issued
November 2013
Journal
American Economic Journal: Economic Policy
Publisher
American Economic Association
Citation
Pindyck, Robert S, and Neng Wang. “The Economic and Policy Consequences of Catastrophes.” American Economic Journal: Economic Policy 5, no. 4 (November 2013): 306–339.
Version
Final published version
Abstract
How likely is a catastrophic event that would substantially reduce the capital stock, GDP, and wealth? How much should society be willing to pay to reduce the probability or impact of a catastrophe? We answer these questions and provide a framework for policy analysis using a general equilibrium model of production, capital accumulation, and household preferences. Calibrating the model to economic and financial data, we estimate the mean arrival rate of shocks and their size distribution, the tax on consumption society would accept to limit the maximum size of a catastrophic shock, and the cost to insure against its impact.
MIT Department
Sloan School of Management
Terms of Use
Article is made available in accordance with the publisher's policy and may be subject to US copyright law. Please refer to the publisher's site for terms of use.
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DOI of Published Version
https://doi.org/10.1257/pol.5.4.306
