Density and disasters: economics of urban hazard risk.

Author:Lall, Somik V.

Following the terrible disaster which struck Haiti last month, in which more than 200,000 people are estimated to have died, the degree to which human populations are vulnerable to natural disasters as they agglomerate in urban areas has received renewed attention. After all, most of those killed in Haiti lived in the capital city, Port au Prince. This is a particularly relevant question given that the World Bank (2009) estimates that across the world the urban population in areas with significant probability of major earthquakes will increase from 370 million to 870 million between 2000 and 2050 (figure 1).


What should be done to prevent future earthquakes (and other natural hazards) from exacting a huge toll on such populations?

In this article, based on a recent World Bank Policy Research Paper (see further reading) we describe the cope-mitigate-transfer framework as a method to inform natural hazard management options for various types and sizes of cities, and emphasize the importance of good urban management and public disclosure of information in hazard risk reduction.

The cope-mitigate-transfer framework

Even in the most hazard-prone cities, disaster risk is unlikely to reduce population growth, because the economic premium due to agglomeration economies and the amenity value of large cities dominate the location decisions of firms and people. Public policies aimed at slowing down the growth of hazard-prone cities are unlikely to succeed.

However, reducing urban hazard risk through large scale mitigation infrastructure must carefully consider the dynamics of city demand. Building large protective infrastructure may make sense in rapidly urbanizing places that are attracting skilled workers and private investment, where land is scarce, and fiscal capacity sufficient. They may not be justified in stagnant or declining areas. This applies to ex-ante investments as much as to the decision to rebuild. Sometimes, rather than 'build back better' the preferred strategy may be 'better build elsewhere.'

Seminal work by Isaac Erlich and Gary Becker emphasized the interaction among self protection, self insurance and market insurance in managing hazardous events. This framework can inform natural hazard management options across the urban portfolio. For the largest and most dynamic cities we expect that the benefits from agglomeration economies outweigh greater risk, especially when the probabilities are relatively small for...

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