TY  - JOUR
AU  - Pindyck,Robert S.
AU  - Wang,Neng
TI  - The Economic and Policy Consequences of Catastrophes
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 15373
PY  - 2009
Y2  - September 2009
UR  - http://www.nber.org/papers/w15373
L1  - http://www.nber.org/papers/w15373.pdf
N1  - Author contact info:
Robert S. Pindyck
MIT Sloan School of Management
100 Main Street, E62-522
Cambridge, MA  02142
Tel: 617/253-6641
Fax: 617/258-6855
E-Mail: RPINDYCK@MIT.EDU

Neng Wang
Columbia Business School
3022 Broadway, Uris Hall 812
New York, NY 10027
Tel: 212/854-3869
Fax: 212/662-8474
E-Mail: nw2128@columbia.edu
AB  - How likely is a catastrophic event that would substantially reduce the capital stock, GDP and wealth? How much should society be willing to pay to reduce the probability or impact of a catastrophe? We answer these questions and provide a framework for policy analysis using a general equilibrium model of production, capital accumulation, and household preferences. Calibrating the model to economic and financial data, we estimate the mean arrival rate of shocks and their size distribution, the tax on consumption society would accept to limit the maximum size of a catastrophic shock, and the cost to insure against its impact.
ER  -