Impact of Geological Hazards on Regional Economic Development: Evidence from the Pacific Ring of Fire

Abstract

This study examines seismic activity, volcanoes, tsunamis, and related hazards over a 20-year period in order to assess the economic effects of geologic hazards on the regional development trajectories of the Pacific Ring of Fire. Based on empirical data, the region's GDP losses range from 0.5 to 5.9%, contingent on the hazard's characteristics, volume, and potential for local recovery. The analysis shows how initial impacts are multiplied by cross-border spillovers and supply chain disruption cascading effects. Recovery pathways show considerable variation, with insurance density, mitigating infrastructure quality, and institutional strength being the primary correlates of economic strength, according to panel regression with fixed effects estimates. Areas that implement effective and comprehensive disaster risk reduction programs experience recovery times that are as much as 42% shorter. Additionally, the estimates show that ex-ante investments in active risk management can easily outperform ex-post post-disaster reconstruction expenditures, with benefit-cost ratios ranging from 4 to 7:1.