Between 1980 and 2002, India experienced fourteen major earthquakes that killed a total of 32,117 people while the United States experienced eighteen major earthquakes that killed only 143 people. A disproportionate share of the deaths caused by such environmental shocks as earthquakes, floods, cyclones, hurricanes, and extreme temperature events are borne by people in developing countries. The Intergovernmental Panel on Climate Change reports that 65% of world deaths from natural disasters between 1985 and 1999 took place in nations whose incomes were below $760 per-capita.
In a recent paper published in the May 2005 issue of Review of Economics and Statistics titled “The Death Toll From Natural Disasters: The Role of Income, Geography, and Institutions”, I used several data sets to investigate what types of nations suffer the least when disasters strike. Income matters! There is no Environmental Kuznets Curve for deaths from disasters. Fewer people die from comparable shocks (measured by the Richter scale for Earthquakes) in richer nations relative to poorer nations.
Why is income such a good “insurance policy” against such shocks? Rising incomes lead people to purchase higher quality structures that might be better able to withstand natural shocks. Richer people will demand homes located in safer communities and homes that are built out of stronger more durable materials. Once the shock has taken place, death counts can be higher if the nation does not have access to good medical care and emergency treatment and crisis management. Government regulation also plays a role in protecting the populace in richer nations. Richer nations will be able to invest and enforce zoning and building codes. Building codes internalize externalities of structural soundness of a building and this has a social value that the owner is unlikely to internalize and it improves the quality of life of people in an immediate vicinity affected.
I post this today in the face of the hurricane striking New Orleans. There will certainly be property damage but given the advance notice and the mandated evacuation deaths will be minimal.