Definition and measurement of natural dister damage cost by Ramsey growth model

This study proposes a consistent definition of natural disaster damage costs, i.e., equivalently, of natural disaster prevention benefits in accordance with general definition of benefits, Willingness to Pay, more concretely, Equivalent Variation, of any policy such as tax reforms, transportations, environments, infrastructures, etc. In order to formulate the damage cost it needs to model the economic behavior at and after the disaster periods given the disaster physical damages are measured by the equivalent labor loss and the equivalent capital stock loss. The model is composed of two stages. The first is the static general equilibrium given the labor loss and the equivalent capital stock loss measured above, for which this study will adopt the static computable general equilibrium (SCGE). The second is the dynamic macroeconomics which models the recovery process given the initial labor and capital stock for cases with and without disaster, for which this study will adopt the dynamic computable general equilibrium (DCGE). The damage cost or benefit of the disaster is defined as the present value of the time stream of Equivalent Valuation for the time stream of utility change due to the initial condition change. Then it will be shown that the conventional damage calculation by the reconstruction and/or replacement cost is assumes that the second stage immediately takes place at the disaster time, therefore, the first stage does not happens. Also sometimes the economic impacts on GDP of disaster capital stock loss are calculated but nothing is referred to the damage cost of disaster. This is because there is not yet clear definition of damage cost and lack of recognition of it is a work of only the first stage. Finally it will be discussed how to transform the disaster physical damages to the equivalent labor and capital stock loss. The physical damages are either private capital loss or labor loss or output loss or social overhead capital loss, each of which enters to CGE as private capital loss, labor force loss, efficiency parameter reduction due to both output loss and social overhead capital loss. Then assuming constant returns to scale the efficiency parameter change due to both output loss and social overhead capital loss can be transformed to the loss of labor and capital stock

Measurement of flood damage due to climate change by dynamic spatial computable general equilibrium model

To explain economic impacts of flood damage due to climate change over time in Japan, this study develops a dynamic spatial computable general equilibrium model, and measures flood damage costs through some numerical experiments. It is inferred that the frequency and the intensity of flood are on the long-term increase. In the category of flood damage in Japan, there are serious flood damages to social capitals. These observations are described in statistical research on flood by Japanese government. In this study, these damages are defined as gthe direct damageh, and are different from decrease in equivalent consumption due to the direct effect. Also, the proportion of the direct damage to decrease in equivalent consumption is defined as gthe dynamic multiplier of damage costh. This study develops a spatial CGE model based on dynamic structure of the Ramsey model. Our model has 8 regions and 20 production sectors. The flood scenario is described as increase in capital depreciation rate due to flood from 2000 to 2050. In our simulations, 5 flood damage rates are used consisting of damage rates calculating by 4 climate models and uniform damage rate throughout Japan. To consider dynamic spillover effects of flood damage, this study proposes two indices as dynamic damage costs that are comparative static and transition dynamics. The former is the long-term damage caused as the result of shifts from a steady-state equilibrium to another by increasing in the frequency and the intensity of flood due to climate change. On the other hand, the latter is the difference between flood damage costs by a baseline scenario and by a flood scenario, on the transition path to a new steady-state equilibrium. As the transition path can be described, this study shows possible dynamic spillover effects of flood damage over time. The findings in this study are shown below. 1)In 2050, the total amount of flood damage cost is estimated to be from about US$0.4 billion to about US$5.6 billion. 2)The decrease in the rate of investment return by the long-term increase in flood damage causes decrease in savings and consumption, so that the dynamic multiplier of damage cost is estimated to be from 1.2 to 1.7 times

Willingness to Pay for Mortality Risk Reduction and Environmental Kuznets Curve Hypothesis

Global Warming will cause severe decline of water quality over the world in near future, and mortality risk due to water pollution causing diseases of diarrhea or digestive organs has been one of serious problems especially for Asian developing countries. Generally speaking, implementation of sewage and water-supply system might be the most effective policy against such health problems. By the way, the timing to carry out a policy or project against such a problem is typical and central debate of Environmental Kuznets Curve hypothesis. It suggests that there exists an empirical relation between per capita income and some measures of environmental quality, and that as income goes up there is increasing environmental degradation up to a point, after which environmental quality improves. The relation has an 'inverted-U' shape. However, only a limited water pollution matters seems to obey to the rule, and several recent empirical findings are mostly consistent with negative remarks about the law. Our main objective is to examine effectiveness of EKC hypothesis with survey data sets in Laos and Vietnam to ask citizens' WTP (Willingness to Pay) for mortality risk reduction as a contingent policy or project has been implemented. The WTP can be also estimated for each category of participant's generation, as 20's, 30's, 40's, 50's, and over 60. On this procedure, we found also relative robust and characteristic relationships between their age or income and WTP. In a subsequent theoretical study, we found that these relationships holds theoretical consistency for both of Option Price Model and Optimal Expenditure Decision Model, those are discriminated by typical ways of answering questions of the participants and assumed that the one doesn't interest in the world after his death. 6 propositions are also derived in this procedure, and some of them refer to functional form of WTP with respect to a variable of risk reduction. So far as our empirical findings are consistent with theoretical suggestions, EKC hypothesis is supported well at least about transition of their preference for improved environment with economic development, and the turning point of EKC does not rely only on the income level but also aging degree of the society

Economic Evaluation of Small Hydroelectric Generation Project which aims to both Global Warming Adaptation and Regional Economic Revitalization

Based on the international agreements after the Kyoto Protocol, some projects to reduce the greenhouse gas emission have been promoted even in Japan. Therefore, policies such as various regulations and introduction of the environmental tax have been discussed, so people will be asked for big burden. However, in many local cities, problems such as falling birth rate, aging, and stagnation of regional economy are important subjects, so it is hard to give the priority to the global warming prevention policy. In addition, in spite of abundance of natural resources such as forest, wind, water, and sunlight, the local city has a problem that the fund for the global warming prevention policy which utilizes these resources cannot be procured by financial difficulties. On the other hand, the renewable energy business with citizen participation will give the local community some effects. On the environment aspect, the carbon dioxide emission will be reduced by introducing the renewable energy. On the economy aspect, the local employment will be stimulated if the local contractor will construct the renewable energy system and maintain it. Therefore, there should be the renewable energy business which would achieve both the global warming prevention and the regional economic revitalization. Furthermore, through such business with citizen participation, the environmental activity of the local residents will be activated, and we can expect that the semi-public service will be improved and the satisfaction of the local residents will rise. In this paper, we propose a small hydroelectric generation project with citizen participation which includes not only donation to the project but also cooperation in the activity such as cleaning and patrols. And the project is evaluated economically based on the willingness to work (WTW) by using the contingent valuation method and the general equilibrium analysis. As a result, the WTW for the project has been estimated as a function of its various attributes; the revenue, the profit to the local community, and the reward to contributors. On the other hand, the revenue should vary with the number of contributors; where the number means the WTW. As for the profit to the local community and the reward to contributors, these are positioned as the policy variables. Therefore, by using our evaluation model, we will be able to evaluate various policies for the renewable energy business; for example, policies which make the revenue maximize, policies which make the social utility maximize, and so on

Measurement of Value of Statistical Life by Evaluating Diarrhea Mortality Risk due to Water Pollution in Laos and Vietnam

Diarrhea mortality risk due to water pollution is one of serious problems that threaten human life in Asian developing countries. This study aims to provide basic data for the cost benefit analysis of countermeasures against diarrhea in Laos and Vietnam, and measures the value of statistical life (VSL) concerning diarrhea mortality risk by using the contingent valuation method (CVM). In this study, we have conducted interview survey in Laos and Vietnam in 2011 and 2010. The content of questionnaire sheet is to ask the willingness to pay (WTP) of residents to have a right to obtain improved water resources in their daily usages and avoid diarrhea mortality risk due to water pollution. By using the data set, we can know how much the residents want to pay for risk reduction, and know how much they evaluate their own life in monetary term, which is the VSL. Also, by summing up the WTP and comparing with the implementation cost, we can know whether or not they will agree to implement some policies or infrastructures. This kind of methodology, the CVM, is directly linked to context of cost-benefit analysis under uncertainty. The outputs of this study are our first attempt to approach the water resource conflict problem of Mekong River. It is apparent that consistent effort to find out certificate values of water resource for each region is urgent and necessary matter, and as an extension of it, we hope to collect the guideline at last to avoid such the worst catastrophic situation. As a result, we have derived the damage cost function of diarrhea, which includes the mortality risk change as its variable. By using the function, the WTP for reducing diarrhea mortality risk, where 20, 40, 60 and 80 persons will be saved every 100,000 population annually, has been measured 9.580, 11.131, 12.038 and 12.682 US$per year in Laos and 41.932, 47.256, 50.371 and 52.581 US$ per year in Vietnam, respectively. And the VSL has been measured 47,898, 27,827, 20,064 and 15,853 US$in Laos and 209,660, 118,141, 83,952 and 65,726 US$ in Vietnam, respectively

Measurement of Use and Non-use Values of Shirakami Mountain Range by using CVM Consistent with TCM

Shirakami Mountain Range has the largest primeval forest in the world, and has some public functions; the biodiversity function, the water resource cultivation function, the health and recreation function and so on. This study tries to measure its environmental economic value by using the travel cost method (TCM) and the contingent valuation method (CVM). The TCM and the CVM are well-known as the typical technique of environmental economic valuation. The TCM can measure only the direct and current use value of environmental goods, but the CVM can measure the whole value including the non-use value of them. In the practice of environmental economic valuation, it is often adopted that the use value is measured by the TCM and that the non-use or the whole values are measured by CVM. However, there is no statistical significance in the difference between those values measured by the TCM and the CVM, because these methods are modeled independently and have no theoretical consistency. In this study, we have constructed a valuation model based on the CVM consistent with the TCM, in order to measure the use and the non-use values of environmental goods consistently. By applying this model to measurement of environmental economic value of Shirakami Mountain Range, practicality of the method is also examined. The result indicated that the willingness to pay (WTP) for the environmental preservation of Shirakami Mountain Range was estimated as 6,679 JPY/person/year by using the CVM which had no consistency with the TCM, but it was estimated as 1,028 JPY/person/year by using our model based on the CVM consistent with the TCM. Now, 6,679 JPY/person/year means its whole value, but 1,028 JPY/person/year means its non-use value. On the other hand, by using the TCM, the consumer surplus (CS) was estimated as 11,154 JPY/person/year in the local area of Shirakami Mountain Range and 5,579 JPY/person/year in Tokyo. Here, these values mean the use value of Shirakami Mountain Range. That is to say, the whole value was estimated as lower than the use value by using the CVM which had no consistency with the TCM. As a result, our model could measure the use and the non-use values of environmental goods consistently

Measurement of Value of Statistical Life by Evaluating Diarrhea Mortality Risk due to Water Pollution in Laos and Vietnam

Abstract: Diarrhea mortality risk due to water pollution is one of serious problems that threaten human life in Asian developing countries. This study aims to provide basic information for cost-benefit analysis of countermeasures against such a problem in Laos and Vietnam, with a measure of VSL (value of statistical life) concerning diarrhea mortality risk by using CVM (contingent valuation method). With a dataset of questionnaire, the damage cost function explained by the change of diarrhea mortality risk has been derived

A Service of zbw Leibniz-Informationszentrum Wirtschaft Leibniz Information Centre for Economics Measurement of Use and Non-use Values of Shirakami Mountain Range by using CVM Consistent with TCM

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