MACRO

Disaster risk management in developing countries

Proactive risk management is increasingly seen as an integral part of achieving sustainable development. Natural disasters impose large liabilities on local and national governments, which are responsible for repairing and replacing public assets, as well as for providing post-disaster assistance and longer-term development investments. Safeguarding development gains is on the top of agendas, especially in light of the anticipated impact of climate change that will likely disproportionately affect many low income countries.

The Risk and Resilience Program at the International Institute for Applied Systems Analysis has substantial experience in providing science-based policy advice on catastrophic disaster risk management in the context of developing country economies. We have found that there remains an important science-policy gap in the use of catastrophic disaster risk assessment in informing macroeconomic, budgetary and development planning. A user-friendly analytical and decision-support tool is needed that can easily incorporate bottom-up risk and socioeconomic assessments that are increasingly becoming available. Furthermore, these need to be linked to a theoretically sound macroeconomic model that reflects the empirical realities of developing countries.

MACRO's innovative risk modeling framework

The MACRO Project fills this important knowledge gap by building an integrated catastrophe-macroeconomic modeling framework, which is informed by structuralist economic thinking. It combines a bottom-up assessment of disaster risk and SDG investment needs with top-down macroeconomic assessment of public investment constraints.

Cyclone risk management in Madagascar

The aims of the MACRO Project are two-fold; the first is to examine the applicability of structuralist macroeconomic modeling in the context of Madagascar, a low-income economy that is striving to achieve the Sustainable Development Goals (SDGs), under catastrophic natural disaster risk. This will be conducted by building a combined bottom-up and top-down modeling and decision-support tool.

The second aim is to demonstrate the applicability of this tool in the context of a data-scarce, developing country environment. Specifically, the case of cyclone-risk management in Madagascar will be utilized. The proposed model will:

• assess the risk of catastrophic disaster on the public budget given underlying rigidity of macroeconomic and institutional structures facing developing countries;

• quantify the impact of natural disasters in terms of poverty implications and opportunity cost (i.e. forgone social expenses that could have been spent for public services provisions needed to achieve the SDGs);

• examine various policy options for risk-sensitive public investment on SDGs.

Last edited: 05 October 2017