Managing Indirect Economic Consequences of Disaster Risk: The Case of Nepal

  • Reinhard MechlerEmail author
  • Stefan Hochrainer-Stigler
  • Kazuyoshi Nakano
Part of the Advances in Natural and Technological Hazards Research book series (NTHR, volume 32)


Natural disasters can exert significant economic and developmental impacts in countries that lack the economic resilience to bounce back post event. Yet, the brunt of these impacts often goes unrecorded and the information base for improving the financial and economic management of disaster risk in many instances is at best limited. Systematic disaster risk modeling can be a starting point for devising a comprehensive risk management approach. This chapter presents quantitative modeling analysis using the IIASA CATSIM framework for assessing economic natural disaster risk for the case of Nepal. We calculate country level direct disaster risk as well as the corresponding indirect effects using growth modeling and input-output analysis. We find the economic and fiscal risks posed by natural disasters in Nepal to be large and potentially long-lasting, particularly when they are triggered by earthquake risk. As well, disaster events ripple through the economy and may lead to important distributional effects. Given these results, we suggest there is a clear case for considering risk in economic and fiscal planning processes in Nepal and similar heavily disaster exposed countries.


Fiscal and economic risks Disaster risk modeling Multi-risk assessment Extreme events Nepal 


  1. Acharya S (2007) Flow structure in Nepal and the benefit to the poor. Econ Bull 15(17):1–14Google Scholar
  2. ADPC, NGI, IIASA (2010) Nepal all hazards risk assessment. Project Report to the Government of Nepal by the Asian Disaster Preparedness Center, Norwegian Geotechnical Institute and International Institute for Applied Systems Analysis, BangkokGoogle Scholar
  3. Benson C, Clay E (2004) Understanding the economic and financial impacts of natural disasters, Disaster risk management series no. 4. World Bank, Washington, DCCrossRefGoogle Scholar
  4. Bettencourt S, Croad R, Freeman P, Hay J, Jones R, King P, Lal P, Mearns A, Miller G, Pswarayi-Riddihough I, Simpson A, Teuatabo N, Trotz U, Van Aalst M (2006) Not if but when – adapting to natural hazards in the Pacific islands region: a policy note. East Asia and Pacific Region, Pacific Islands Country Management Unit. World Bank, Washington, DCGoogle Scholar
  5. Bhattarai D, Chhetri MB (2001) Mitigation and management of floods in Nepal. Ministry of Home Affairs, HMG/NepalGoogle Scholar
  6. Burby JR (1991) Sharing environmental risks: how to control governments losses in natural disasters. Westview Press, BoulderGoogle Scholar
  7. CRED (2010) Centre for research on the epidemiology of disasters international disaster database. Université Catholique de Louvain, Brussels, Belgium
  8. Fisher S, Easterly W (1990) The economics of the government budget constraint. World Bank Res Obs 5(2):127–142CrossRefGoogle Scholar
  9. Freeman PK, Martin LA, Linnerooth-Bayer J, Mechler R, Saldana S, Warner K, Pflug G (2002) Financing reconstruction. Phase II background study for the inter-American development bank regional policy dialogue on national systems for comprehensive disaster management. InterAmerican Development Bank, Washington, DCGoogle Scholar
  10. HIPC (2002) About the HIPC initiative, Washington, DC.
  11. Hochrainer-Stigler S, Mechler R and Pflug G (2013) Modeling macro scale disaster risk: the CATSIM model. In: Amendola A, Ermolieva T, Linnerooth-Bayer J, Mechler, R (eds) Integrated catastrophe risk modeling: supporting policy processes, Springer, Dordrecht, pp xx–xxGoogle Scholar
  12. Linnerooth-Bayer J, Mechler R, Hochrainer S (2011) Insurance against losses from natural disasters in developing countries. Evidence, gaps and the way forward. J Integr Disaster Risk Manag 29(1):57–82Google Scholar
  13. Okuyama Y (2008) Critical review of methodologies on disaster impacts estimation. Background paper for World Bank report economics of disaster risk reduction. World Bank, Washington, DCGoogle Scholar
  14. Okuyama Y, Sahin S (2009) Impact estimation of disasters: a global aggregate for 1960 to 2007. Policy research working paper 4963, World Bank, Washington, DCGoogle Scholar
  15. Pyatt G, Roe AR (1977) Social accounting for development planning. Harvard University Press, CambridgeGoogle Scholar
  16. Pyatt G, Thorbecke E (1976) Planning techniques for a better future. International Labor Organization, GenevaGoogle Scholar
  17. Stone JRN (1961) Input-output and national accounts. Organization for Economic Cooperation and Development, ParisGoogle Scholar
  18. Upreti S (2006) The nexus between natural disasters and development: key policy issues in meeting the millennium development goals and poverty alleviation. Economic policy network, Policy paper 27. Government of Nepal and Asian Development Bank, Nepal “Resident Mission”Google Scholar
  19. World Bank (2009) Nepal at a glance. World Bank, Washington, DCGoogle Scholar
  20. World Bank (2012) World bank development indicators. World Bank, Washington, DCGoogle Scholar

Copyright information

© Springer Science+Business Media Dordrecht 2013

Authors and Affiliations

  • Reinhard Mechler
    • 1
    Email author
  • Stefan Hochrainer-Stigler
    • 1
  • Kazuyoshi Nakano
    • 2
  1. 1.Risk, Policy and Vulnerability (RPV) ProgramInternational Institute for Applied Systems Analysis (IIASA)LaxenburgAustria
  2. 2.Disaster Prevention Research InstituteKyoto UniversityKyotoJapan

Personalised recommendations