Charity and Modeling Natural Disasters

The recent disaster in Haiti prompted some questions about whether or not charity matters in the aftermath of a natural disasters. One place to look is to see what extent charity has been incorporated into models of the economic impact of natural disasters. A recent symposium on economic modeling of disasters in the journal Economic Systems Research provides a little guidance on this issue.

Charity falls under a category of behavioral responses that people have to disasters. Economic impact models have just begun to incorporate societies built-in reactions to disasters, including different adaptive responses of households and businesses in and outside of the disaster areas. A paper by Yasuhide Okuyama from the ERS symposium provides an example of a behavior response that may make the economic impact worse:

Okuyama et al. (1999) included the final demand decrease in the rest of Japan after the Kobe earthquake, since people outside of the damaged region felt sorry for the event and for people in the Kobe area, due to the catastrophic destructions of a major city and a large number of casualties, and tended to reduce their discretionary purchases.

Charity, on the other hand, is a behavioral response that could counteract the negative impacts of disasters:

Alternatively, people may purchase necessary goods for the damaged area, such as blankets and/or food, and may donate them, instead of buying other goods for themselves.

Overall though, the author concludes that the economic impact of charitable responses to disaster is not yet well studied or modeled. It’s unclear whether this is due to the complexity of incorporating such behaviors into CGE and other commonly used types of economic models, or because the empirical parameters are not well known, or because researchers believe that charity does not have much affect on the overall economic impact of natural disasters. My hesitant and tentative conclusion is that the fact that this issue is, by the authors account, ”not well studied” suggests to me that researchers in this area may not consider charity an important determinant in the economic impact of natural disasters. I would be interested to see some actual studies on this issue though.

[Via http://modeledbehavior.com]