to future climate change is to have a good idea of the magnitude of the problem that Caribbean islands face. 3 Second, I show that tropical cyclones that do not make landfall can also cause extensive damages, and I explicitly account for the effect of distance between storms and the islands, while most of the literature either disregards non-landfall events or deals with the distance factor implicitly. 4 Third, I estimate the wind-damageelasticity which is an important parameter for the literatures on atmospheric science and environmental economics. The
This paper studies the economic costs of hurricanes in the Caribbean by constructing a novel dataset that combines a detailed record of tropical cyclones’ characteristics with reported damages. I estimate the relation between hurricane wind speeds and damages in the Caribbean; finding that the elasticity of damages to GDP ratio with respect to maximum wind speeds is three in the case of landfalls. The data show that hurricane damages are considerably underreported, particularly in the 1950s and 1960s, with average damages potentially being three times as large as the reported average of 1.6 percent of GDP per year. I document and show that hurricanes that do not make landfall also have considerable negative impacts on the Caribbean economies. Finally, I estimate that the average annual hurricane damages in the Caribbean will increase between 22 and 77 percent by the year 2100, in a global warming scenario of high CO2 concentrations and high global temperatures.