Browsing by Author "Noy, Ilan"

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Open Access
At the very edge of a storm: The impact of a distant cyclone on Atoll Islands
(Te Herenga Waka—Victoria University of Wellington, 2016) Taupo, Tauisi; Noy, Ilan
The intensity of cyclones in the Pacific is predicted to increase and sea levels are predicted to rise, so a small atoll nation like Tuvalu can serve as the ‘canary in the mine’ pointing to the new risks that are emerging because of climatic change. In Tuvalu, households are acutely vulnerable to storm surges caused by cyclones even if the cyclone itself passes very far away (in this case about a 1000km). Based on a survey we conducted in Tuvalu, we quantify the impacts of cyclone Pam (March 2015) on households, and the determinants of these impacts in terms of hazard, exposure, vulnerability and responsiveness. Lastly, we constructed hypothetical policy scenarios, and calculated the estimated loss and damage they would have been associated with – a first step in building careful assessments of the feasibility of various disaster risk reduction policies.
Open Access
Comparing the direct human impact of natural disasters for two (surprisingly similar) cases — the Christchurch earthquake and Bangkok flood of 2011
(Te Herenga Waka—Victoria University of Wellington, 2015) Noy, Ilan
The standard way in which disaster damages are measured involves examining separately the number of fatalities, of injuries, of people otherwise affected, and the financial damage that natural disasters cause. Here, we implement a novel way to aggregate these separate measures of disaster impact and apply it to two recent catastrophic events: the Christchurch (New Zealand) earthquakes and the Greater Bangkok (Thailand) floods of 2011. This new measure, which is similar to the World Health Organization’s calculation of Disability Adjusted Life Years (DALYs) lost from the burden of diseases and injuries, is described in detail in Noy (2014). It allows us to conclude that New Zealand lost 180 thousand lifeyears as a result of the 2011 events, and Thailand lost 2,644 thousand years. In per capita terms, the loss is similar, with both countries losing about 15 days per person due to the 2011 catastrophic events in these two countries. We also compare these events to other potentially similar events.
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The cost of being under the weather: Droughts, floods, and health care costs in Sri Lanka
(Te Herenga Waka—Victoria University of Wellington, 2017) De Alwis, Diana; Noy, Ilan
We measure the cost of extreme weather events (droughts and floods) on health care in Sri Lanka. We find that frequently occurring local floods and droughts impose a significant risk to health when individuals are exposed directly to these hazards, and when their communities are exposed, even if they themselves are unaffected. Those impacts, and especially the indirect spillover effects to households that are not directly affected, are associated with the land-use in the affected regions and with access to sanitation and hygiene. Finally, both direct and indirect risks associated with flood and drought on health have an economic cost; our estimates suggest Sri Lanka spends 52.8 million USD per year directly on the health care costs associated with floods and droughts, divided almost equally between the public and household sectors, and 22% vs. 78% between floods and droughts, respectively. In Sri Lanka, both the frequency and the intensity of droughts and floods are likely to increase because of climatic change. Consequently, the health burden associated with these events is only likely to increase, demanding precious resources that are required elsewhere.
Open Access
Droughts and farms’ financial performance in New Zealand: A micro farm level study
(Te Herenga Waka—Victoria University of Wellington, 2019) Pourzand, Farnaz; Noy, Ilan; Sağlam, Yiğit
We quantify the impacts of droughts in New Zealand on the profitability of dairy, and sheep and beef farms. Using a comprehensive administrative database of all businesses in New Zealand, we investigate the impact of droughts on farm revenue, profits, return on capital, business equity, debt to income ratio, and interest coverage ratio. Over the period we examine (2007-2016) about half of the districts experienced severe droughts, and almost 85% of districts were affected by more moderate droughts at least once. For dairy farms, there is a strong negative relationship between the occurrence of droughts two years earlier and farms’ revenue, profit and consequently their return on capital. More surprisingly, we found that current (same fiscal year) drought events have positive impacts on dairy farms’ revenue and profit; this effect is most likely attributable to drought-induced increases in the price of milk solids (New Zealand is the market maker in this global market). In general, dairy farmers ‘benefit’ more from drought events when compared to sheep/beef farms, whereas the latter sector has less impact on global prices. These findings are useful for shaping climate-change adaptation as there is a clear variation in the future climate-change projections of drought intensities and frequencies for different regions in New Zealand.
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ECON309: Economics: International Trade
(Victoria University of Wellington, 2012) Noy, Ilan
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ECON309: Economics: International Trade
(Victoria University of Wellington, 2014) Noy, Ilan
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ECON338: Economics: Monetary Economics
(Victoria University of Wellington, 2016) Noy, Ilan
Open Access
The economic and fiscal burdens of disasters in the Pacific
(Te Herenga Waka—Victoria University of Wellington, 2016) Noy, Ilan; Edmonds, Christopher
The Pacific Islands face the highest disaster risk, in per capita terms, globally. Examples of catastrophic events in the region include the 2009 tsunami in Samoa, the 2014 floods in the Solomon Islands, and the 2015 cyclone Pam in Vanuatu. Even without these catastrophic events, countries in the Pacific are affected by frequent natural hazards of smaller magnitude. We first evaluate the three main sources quantifying risk in the region: EMDAT, Desinventar, and PCRAFI. We describe these sources and conclude they all underestimate the risk, especially for atoll nations, and because of four important trends with respect to changes in natural hazards as a consequence of climate change. These are: (1) increasing frequency of extremely hot days; (2) changing frequency and intensity of extreme rainfall events causing flash flooding or droughts; (3) increasing intensities and changing trajectories of cyclones; and (4) sea-level rise and other oceanic ecological changes. Financial protection is the one policy area where the Pacific is the most exposed—given the very large role of the public sector in the region. It is also the area where there is probably the most room for easy-to-implement improvement. We end by analysing the applicability of various financial instruments to facilitate both ex-ante and ex-post disaster risk management in the region.
Open Access
Economic consequences of pre-COVID-19 epidemics: A literature review
(Te Herenga Waka—Victoria University of Wellington, 2021) Noy, Ilan; Uher, Tomáš
In 2020, we all realized we should know more about the economic impacts of pandemics. Here, we summarize the contemporary research on the economic consequences of past epidemics and pandemics with a primary focus on highly infectious pathogens such as influenza and Ebola (as distinct from less infectious, but maybe ultimately more lethal or damaging diseases like AIDS). The paper draws exclusively from scientific research relating to events preceding the current COVID-19 crisis, though it does describe the many new studies completed recently in connection to the renewed scientific interest in past events. We do not focus on the on-going COVID-19 global crisis, since we believe it is premature to attempt to provide a thorough summary of our state of knowledge about this event. The economic consequences of epidemics are categorized into macroeconomic, microeconomic, socio-economic, sectoral and long-term impacts. Impact pathways and impact determinants relating to these effects are also described. This body of research suggests that epidemics have a broad range of inter-connected economic consequences through both supply and demand-side channels, with the behavioral response of individuals, communities, societies, and governments being one of the most important determinants of these impact (rather than disease prevalence and progression itself). Furthermore, the economic effects of epidemics can be long-lasting.
Open Access
Fire-Sale FDI? The impact of financial crises on foreign direct investment
(Te Herenga Waka—Victoria University of Wellington, 2012) Bogach, Olga; Noy, Ilan
In this paper, we analyze the evolution of foreign direct investment (FDI) inflows to developing and emerging countries around financial crises. We empirically and thoroughly examine the Fire‐Sale FDI hypothesis and describe the pattern of FDI inflows surrounding financial crises. We also add a more granular detail about the types of financial crises and their potentially differential effects on FDI. We distinguish between Mergers and Acquisitions (M&A) and Greenfield investment, as well as between different motivations for FDI—horizontal (tariff jumping) and vertical (integrating production stages). We find that financial crises have a strong negative effect on inward FDI in our sample. Crises are also shown to reduce the value of horizontal and vertical FDI. We do not find empirical evidence of Fire‐Sale FDI. On the contrary, financial crises are shown to affect FDI flows and M&A activity adversely.
Open Access
Floods and spillovers: Households after the 2011 great flood in Thailand
(Te Herenga Waka—Victoria University of Wellington, 2014) Noy, Ilan; Patel, Pooja
In 2011, Thailand experienced its worst flooding in decades; it caused widespread damages, and a considerable loss of life. Using data from the Thai Household Socio-Economic Survey (THSES), this paper analyses its economic impacts. In the 2012 THSES, households answered a set of questions on the extent of flooding they experienced in the 12 months prior. As the same households are followed over time, the timing of the survey and its panel structure allows us to analyse household welfare before and after the flood, for both affected households and for those who were not directly flooded. We can thus measure the true impact of the disaster on income, expenditure, assets, debt and savings levels as well as labour market outcomes. We analyse flood impacts across different socio-economic groups and livelihoods, and identify spillover effects on those households that were not directly affected by the flooding.
Open Access
Household vulnerability on the frontline of climate change: The Pacific atoll nation of Tuvalu
(Te Herenga Waka—Victoria University of Wellington, 2016) Taupo, Tauisi; Cuffe, Harold; Noy, Ilan
This paper investigates the vulnerability of households to climatic disasters in the low-lying atoll nation of Tuvalu. Small Island Developing States, particularly the atoll islands, are considered to be the most vulnerable to climatic change, and in particular to sea-level rise and its associated risks. We construct poverty and hardship profiles for households on the different islands of Tuvalu, and combine these with geographic and topographic information to assess the exposure differentials among different groups using spatial econometric models. Besides the observation that poor households are more vulnerable to negative shocks because they lack the resources to respond, we also find that they are also more likely to reside in highly exposed areas to disasters (closer to the coasts and at lower elevation) and have less ability to migrate (between and within the islands).
Open Access
Insuring disasters: A survey of the economics of insurance programs for earthquakes and droughts
(Te Herenga Waka—Victoria University of Wellington, 2017) Noy, Ilan; Kusuma, Aditya; Nguyen, Cuong
Natural disasters have adverse consequences. A combination of effective mitigation strategies and appropriate coping measures—decreasing both exposure and vulnerability—can reduce their detrimental impact. Further policies can reduce the consequent losses to the economy in the aftermath of catastrophic events. Although constituting no panacea, the evidence suggests that insurance enables improved recovery and increases resilience. Yet, insuring catastrophic risks is complex and not easily achieved. Different types of disaster insurance products are found globally, but to narrow our discussion, we focus on two types of insurance for catastrophic hazards: earthquake insurance and agricultural insurance (for floods and droughts). We survey strategies implemented by governments, the private sector and multilateral/regional organizations that aim to address several impediments to insurance adoption and also describe the available evidence about the performance of such insurance systems in the aftermath of disaster events. We conclude with some thoughts about future research directions.
Open Access
Insuring earthquakes: How would the Californian and Japanese insurance programs have fared down under (after the 2011 New Zealand earthquake)?
(Te Herenga Waka—Victoria University of Wellington, 2017) Nguyen, Cuong; Noy, Ilan
Earthquakes are insured only with public sector involvement in high-income countries where the risk of earthquakes is perceived to be high. The proto-typical examples of this public sector involvement are the public earthquake insurance schemes in California, Japan, and New Zealand (NZ). Each of these insurance programs is structured differently, and the purpose of this paper is to examine these differences using a concrete case-study, the sequence of earthquakes that occurred in the Christchurch, New Zealand, in 2011. This event turned out to have been the most heavily insured earthquake event in history. We examine what would have been the outcome of the earthquakes had the system of insurance in NZ been different. In particular, we focus on the public earthquake insurance programs in California (the California Earthquake Authority - CEA), and in Japan (Japanese Earthquake Reinsurance - JER). Overall, the aggregate cost to the public insurer in NZ was $NZ 11.1 billion in its response to the earthquakes. If a similar-sized disaster event had occurred in Japan and California, homeowners would have received $NZ 2.5 billion and $NZ 1.4 billion from the JER and CEA, respectively. We further describe the spatial and distributive patterns of these different scenarios.
Open Access
The long-run socio-economic consequences of a large disaster: The 1995 earthquake in Kobe
(Te Herenga Waka—Victoria University of Wellington, 2015) du Pont IV, William; Okuyama, Yoko; Noy, Ilan; Sawada, Yasuyuki
We quantify the ‘permanent’ socio-economic impacts of the Great Hanshin-Awaji (Kobe) earthquake in 1995 by employing a large-scale panel data set of 1,719 wards from Japan over three decades. In order to overcome a fundamental difficulty of identifying the counterfactual, i.e., the Kobe economy without the earthquake, we adopt the synthetic control method of Abadie et al. (2010). Three important empirical patterns emerge: First, the population size and especially the average income level in Kobe have been lower than the counterfactual level without the earthquake for over fifteen years, indicating a permanent negative effect of the earthquake. Such a negative impact can be found especially in the central areas which are closer to the epicenter. Second, the surrounding areas experienced some positive permanent impacts in spite of short-run negative effects of the earthquake. Third, the furthest areas in the vicinity of Kobe seem to have been insulated from the large direct and indirect impacts of the earthquake.
Open Access
The long-term consequences of natural disasters — A summary of the literature
(Te Herenga Waka—Victoria University of Wellington, 2016) Noy, Ilan; duPont IV, William
The long-term economic impact of natural disasters is a subject that is highly debated among scholars. Several factors should be taken into consideration: These include the type and severity of natural disaster, the underlying wealth of the economy, and the total area of country impacted. Additionally, the way that researchers choose to define long-term impact, look at direct and indirect damage, and the availability of data also matters. Regardless of the method used there is still not a clear consensus concerning the long-term economic consequences of disasters. To discuss the long-term economic impact of natural disasters, one must first define impact. A common way to determine this impact is to compare the economy post disaster to the level it was at prior to the disaster. Some researchers argue that an economy has recovered when it returns to pre-disaster levels. This approach can be useful when comparing the impact in the short-term; however when analyzing the long-term impact it becomes problematic. Economies are constantly changing, and over long periods of time these changes will accumulate. Therefore one of the biggest challenges for researchers is to estimate what the level the economy would be at had the natural disaster not occurred. The way in which researchers go about doing this, can have a large impact on the results they find. Researchers have not reached consensus concerning the long-term consequences to natural disasters. Several authors have found very little to no impact, of natural disasters in the long-term, especially when using country level data. There have been some notable exceptions. Poor countries as well as small island nations have been found to be less resilient in the long-term. Studies using data collected at regional and local, have found a much more nuanced set of results regardless of wealth, income, or size.
Open Access
Macroeconomic adjustment and the history of crises in open economies
(Te Herenga Waka—Victoria University of Wellington, 2012) Aizenman, Joshua; Noy, Ilan
This paper investigates the impact of the history of crises on macroeconomic performance. We first study the impact of past banking crises on the probability of a future banking crisis. Applying data for 1980-2010 for all countries for which the required information is available, controlling for conventional macro variables and the history of banking crises occurring after 1970, we do not detect a learning process from past banking crises. Countries that have already experienced one banking crisis generally have a higher likelihood of experiencing another crisis; and the depth of the present crisis does not appear to be affected by the previous historical experience with crisis events. Evidence also suggests that, in middle-income countries, higher de jure capital account openness is associated with lower likelihood of a banking crisis, a lower ratio of non-performing loans during the crisis, and higher levels of forgone output in the crisis’ aftermath. In contrast, we find that past crisis experience has a significant impact on savings. When facing considerable political risk, the past does seem to matter -- countries with more people who were exposed, over their lifetime, to larger disasters will tend to save more. This association, however, does not hold for countries with more stable political systems. We interpret these results as consistent with a differential sectoral adjustment to a crises hypothesis. The private sector, by virtue of its harder budget constraints, adjusts faster, whereas the government adjusts at a slower pace following a crisis. The financial sector may find itself in between the two. The “too big to fail” doctrine associated with large banks provides them with a softer budget constraint, delaying the day of adjustment; for some, delaying bankruptcy. Occasionally, the separation between banks and the public sector is murky, further delaying necessary adjustments of the financial sector.
Open Access
The measurement of disaster risk: An example from tropical cyclones in the Philippines
(Te Herenga Waka—Victoria University of Wellington, 2016) Yonson, Rio; Gaillard, J. C.; Noy, Ilan
What shapes people’s disaster risk exposure? Using a sub-national (provincial) panel econometric and deductive approach we answer this question by focussing on tropical cyclones, and using the Philippines as a case study for our measurement approach. We construct a new provincial level panel dataset, and use panel estimation methods to assess the influence of socioeconomic (vulnerability), geographic, demographic, topographic (exposure), and meteorological (hazard) characteristics on the resulting fatalities and affected persons from recent tropical cyclones. We find strong evidence that socioeconomic development reduces people’s vulnerability and loss of human lives. Further, good local governance is associated with fewer fatalities. Rapid and unplanned urbanization generates vulnerabilities and increases harm. Exposure, including topography, and hazard strength are likewise important determinants. However, disaster impacts on people appear to be influenced much more by vulnerability and exposure, than by the hazard itself. We quantify this difference in order to contribute to policy planning at national and sub-national scales.
Open Access
Measurement of economic welfare risk and resilience of the Philippine regions
(Te Herenga Waka—Victoria University of Wellington, 2018) Yonson, Rio; Noy, Ilan
Using an economic model to assess welfare risk and resilience to disasters, this paper systematically tackles the questions: 1) How much asset and welfare risks does each region in the Philippines face from riverine flood disasters? 2) How resilient is each region to riverine flood disasters? and 3) What are the available interventions per region to strengthen resilience to riverine flood disasters and what will be their measured benefit? We study the 18 regions of the Philippines to demonstrate the channels through which macroeconomic asset and output losses from disasters translate to consumption and welfare losses at the microeconomic level. Apart from the prioritization of regions based on resilience and welfare risk, we identify a menu of policy options ranked according to their level of effectiveness in increasing resilience and reducing welfare risk from riverine floods. While there are similarities in the ranking of policies among regions with comparable levels of resilience and welfare risk, the ranking of priorities varies for different regions. This suggests that there are region-specific conditions and drivers that need to be integrated into policies and development processes so that these conditions are effectively addressed. Overall, the results indicate that reduction of adverse disaster impacts, including welfare losses, and reduction of poverty are generally complementary.
Open Access
Measuring the impact of insurance on urban recovery with light: The 2011 New Zealand earthquake
(Te Herenga Waka—Victoria University of Wellington, 2018) Nguyen, Cuong; Noy, Ilan
We measure the longer-term effect of a major earthquake on the local economy, using night-time light intensity measured from space, and investigate whether insurance claim payments for damaged residential property affected the local recovery process. We focus on the destructive Christchurch earthquake of 2011 as our case study. In this event more than 95% of residential housing units were covered by insurance, but insurance payments were staggered over 5 years, enabling us to identify their local impact. We find that night-time luminosity can capture the process of recovery and describe the recovery’s determinants. We also find that insurance payments contributed significantly to the process of economic recovery after the earthquake, but delayed payments were less affective and cash settlement of claims were more affective in contributing to local recovery than insurance-managed rebuilding.