United States Institute of Peace

International Network for Economics and Conflict

Insurance & Risk Mitigation

How Economic Growth and Rational Decisions Can Make Disaster Losses Grow Faster than Wealth

Assuming that capital productivity is higher in areas at risk from natural hazards (such as coastal zones or flood plains), this paper shows that rapid development in these areas -- and the resulting increase in disaster losses -- may be the consequence of a rational and well-informed trade-off between lower disaster losses and higher productivity.