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The economics of hydro-meteorological disasters: approaching the estimation of the total costs

Keywords: hydro-meteorological disasters, total cost, risk reduction, economic valuation, intangible costs, indirect costs, JEL Classification Q5

Author(s): Stefano Balbi, Carlo Giupponi, Roland Olschewski and Vahid Mojtahed

Date: 2013-08-28

Issue: 2013-12

  Download this working paper (513 KB.)



Hydro-meteorological disasters have caused increasing losses in recent years. Efficient risk reduction policies require accurate assessment approaches, with careful consideration of costs, beyond direct tangible costs, which are commonly used in practice. Faced with possible risk reduction scenarios, limited financial resources require an improvement in the quality of cost estimation, thereby contributing to an efficient allocation of resources. This paper focuses on the concept of total costs of hydro-meteorological disasters, based on direct and indirect as well as tangible and intangible cost categories. These categories are defined and explained, supported by a comprehensive review of economic valuation methods. Based on this information, practice relevant suggestions are made concerning the most appropriate methods for different cases in terms of scale, availability of data and of technical resources. Our survey also provides critical insights to drawbacks of flood risk estimation, which need to be addressed and carefully dealt with in any future research in this area.

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