Financing the Reconstruction of Public Capital after a Natural Disaster

When a natural disaster destroys public capital, these direct losses are exacerbated by indirect losses arising from reduced output while reconstruction takes place. These indirect losses may be much larger, relative to the direct ones, in low-income countries, because they lack the finance for rapid reconstruction. This paper uses a dynamic general equilibrium model to examine sovereign disaster risk insurance, increased taxation, and budget reallocation as alternative financing mechanisms for countries where increased borrowing is impractical. The analysis suggests that insurance may or may not be helpful, depending on detailed circumstances, and that budget reallocation is potentially very damaging. Raised taxation, if feasible, may be an attractive option.

Bibliographic Details

Main Authors:	Bevan, David, Adam, Christopher
Format:	Working Paper biblioteca
Language:	English en_US
Published:	World Bank, Washington, DC 2016-06
Subjects:	CAPITAL LOSS, PRIVATE CAPITAL STOCK, DEFICIT, MONETARY POLICY, CAPITAL MARKETS, EXTERNAL COMMERCIAL BORROWING, DEVELOPMENT ASSISTANCE, ACCOUNTING, FOREIGN DEBT, STOCK, PRIVATE CAPITAL STOCKS, DOMESTIC BORROWING, INTEREST, RATE OF RETURN, INVESTMENT RATE, INTEREST RATE, EXCHANGE, OPTION, DISCOUNT RATE, REAL INTEREST, REVENUES, BINDING CONSTRAINT, BONDS, INCENTIVES, DISCOUNT, BUDGET CONSTRAINTS, CAPITAL LOSSES, CAPITAL STOCK, PUBLIC ASSETS, TAX, CENTRAL BANKS, INVESTMENT PROCESS, CREDITORS, INTERNATIONAL BANK, OUTPUT LOSSES, BUDGET, CHOICE, LABOR MARKET, POLICY RESPONSE, INDEBTEDNESS, COSTS, COMMERCIAL BORROWING, NATURAL DISASTER, POLICY RESPONSES, CONSTANT SHARE, CONTRACTS, CAPITAL FORMATION, TAX EXEMPTIONS, RECURRENT EXPENDITURES, OPTIONS, NATURAL DISASTERS, DEBT, MARKETS, RETURN, INTERNATIONAL DEVELOPMENT, PUBLIC FINANCE, OPEN ECONOMY, DOMESTIC DEBT, LOANS, REAL INTEREST RATE, RESERVES, CAPITAL STOCKS, PRIVATE CAPITAL, DEBT SERVICE, RECURRENT EXPENDITURE, DOMESTIC BONDS, FINANCE, PUBLIC INVESTMENT, TAXES, CAPITAL SHARES, INVESTMENT DECISIONS, EXPENDITURE, INFRASTRUCTURE INVESTMENT, DEBT FINANCING, INVESTORS, CONSUMPTION, DEBT RATIO, BUDGET CONSTRAINT, INTEREST PAYMENTS, OPPORTUNITY COST, GOOD, TAX RATE, GOVERNMENT BUDGET, CAPITAL, TRANSPARENCY, ACCESS TO CAPITAL, FUTURE, RETURNS, CAPACITY CONSTRAINTS, CONTRACT, GOVERNMENT REVENUE, EXPENDITURES, PROPERTY, PROPERTIES, TAX RATES, SHARES, OPPORTUNITY COSTS, FACE VALUE, INSURANCE PREMIUM, REAL EXCHANGE RATE, DEBT STOCKS, MARKET, INTERNAL RATES OF RETURN, PUBLIC DEBT, PRIVATE DEBT, LEVY, INSURANCE, SOCIAL CAPITAL, TAXATION, DEBT MARKETS, INVESTMENT RATES, GOODS, STOCKS, INVESTMENT, RATES OF RETURN, BOND, SHARE, TAX SYSTEM, REVENUE, EXTERNAL DEBT, INTERNAL RATE OF RETURN, INVESTMENTS, CONSUMER PRICE INDEX, EXCHANGE RATE, ASSET CLASS, INSTRUMENT, ARBITRAGE, REMITTANCES, PUBLIC SPENDING, CAPITAL INVESTMENT, DEVELOPMENT BANK, EXTERNAL BORROWING, DEVELOPMENT POLICY, INVESTING,
Online Access:	http://documents.worldbank.org/curated/en/2016/06/26510507/financing-reconstruction-public-capital-after-natural-disaster https://hdl.handle.net/10986/24635
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