Tropical Cyclones, Climate Change and Income Inequality nexus: An Empirical Investigation of 10 most Vulnerable Asian Countries

Abstract:

Context: Natural disasters are the likely consequences of the climate change and each disaster have disproportionate impact on different segments of population and regions, contributing to the accentuation of inequalities, poverty, deprivation and regional imbalances. Tropical Cyclones increase has lead to increase in income inequality in vulnerable regions.

Methods: The mean logarithmic deviation (MLD) is calculated for measuring income inequality in 10 most vulnerable countries according to hazard frequency and mortality risk from 1990 to 2017. ‘Cyclone risk’ is measured for the vulnerability of each country in terms of population exposure. Dynamic panel data model (LSDVC) is used in the longitudinal data to capture the impact of tropical cyclones on income inequality.

Results and Interpretation: The tropical cyclones increase the MLD in both the short-run and long-run. Net short-term impact from a cyclone risk is exacerbating inequality in the country by 1.25 percentage points of MLD. The ‘risks’ every year and losses unpredictability establishes a possible existence of the vicious circle of poverty by which the countries pull out from income inequality. However, the significant long-run increase in income inequality due to tropical cyclones supports that climate change affects income inequality.

Conclusion: Many theoretical studies states that the effects of tropical cyclones on an economy are ambiguous. Our results show that tropical cyclones play an important role in the accentuation of income inequality among the countries.