Economic Resilience : Definition and Measurement
The welfare impact of a disaster does not only depend on the physical characteristics of the event or its direct impacts in terms of lost lives and assets. Welfare impacts also depend on the ability of the economy to cope, recover, and reconstruct...
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2014
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| Online Access: | http://documents.worldbank.org/curated/en/2014/05/19456702/economic-resilience-definition-measurement-economic-resilience-definition-measurement http://hdl.handle.net/10986/18341 |
| Summary: | The welfare impact of a disaster does
not only depend on the physical characteristics of the event
or its direct impacts in terms of lost lives and assets.
Welfare impacts also depend on the ability of the economy to
cope, recover, and reconstruct and therefore to minimize
aggregate consumption losses. This ability can be referred
to as the macroeconomic resilience to natural disasters.
Macroeconomic resilience has two components: instantaneous
resilience, which is the ability to limit the magnitude of
immediate production losses for a given amount of asset
losses, and dynamic resilience, which is the ability to
reconstruct and recover. Welfare impacts also depend on
micro-economic resilience, which depends on the distribution
of losses; on households' vulnerability, such as their
pre-disaster income and ability to smooth shocks over time
with savings, borrowing, and insurance, and on the social
protection system, or the mechanisms for sharing risks
across the population. The (economic) welfare disaster risk
in a country can be reduced by reducing the exposure or
vulnerability of people and assets (reducing asset losses),
increasing macroeconomic resilience (reducing aggregate
consumption losses for a given level of asset losses), or
increasing microeconomic resilience (reducing welfare losses
for a given level of aggregate consumption losses). The
paper proposes rules of thumb to estimate macroeconomic and
microeconomic resilience based on the relevant parameters in
the economy. It also provides a toolbox of policies to
increase macro- or micro-economic resilience and a list of
indicators that can be used to build a resilience indicator. |
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