Developing a Growth Model of Household Heterogeneity, Human Capital Investment, and Impacts of Disaster Events

Yokomatsu, M., Schinko, T. ORCID: https://orcid.org/0000-0003-1156-7574, ORCID: https://orcid.org/0000-0003-1000-4251Mochizuki, J., & Rezai, A. (2023). Developing a Growth Model of Household Heterogeneity, Human Capital Investment, and Impacts of Disaster Events. In: 28th Annual Conference of the European Association of Environmental and Resource Economists (EAERE 2023), 27 - 30 June 2023, The Cyprus University of Technology, Cyprus.

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Abstract

This study develops a simple monetary growth model of the sluggish factor-price adjustment to examine GDP growth and distributional implications of climate-related disasters with a special focus on human capital investment in developing countries. The model demonstrates an endogenous business cycle through integration of nonlinear factors associated with the money-demand function and the human capital investment function. The results of the numerical analysis suggest that there is the possibility that a disaster occurring in an economy experiencing unemployment increases GDP in the short run but hampers growth in the long run. This is due to the interruption of human-capital investment, implying that the widespread view that a disaster causes short-run adverse GDP impacts may not always hold true and negative indirect impacts may manifest in the long-term. On such a path, development in disaster mitigation infrastructure could reduce human-capital gaps in the long run by supporting continued post-disaster human-capital investment opportunities for the poor. The study further points out the methodological potential of the nonlinear dynamic model for analyzing indirect risks. The nonlinear feature of our model derives long-term non-monotonic impacts on economic dynamics that are sensitive to small changes in initial values and direct disaster damages. This allows for the estimation of various qualitative and quantitative market responses associated with a macroeconomic situation such as a boom and recession, and the possibilities of lagged influences.

Item Type:	Conference or Workshop Item (Paper)
Research Programs:	Population and Just Societies (POPJUS) Population and Just Societies (POPJUS) > Equity and Justice (EQU)
Depositing User:	Michaela Rossini
Date Deposited:	09 Oct 2023 11:45
Last Modified:	05 Jan 2024 13:51
URI:	https://pure.iiasa.ac.at/19123

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