A Study Of Optimal Disaster Relief Policy In China Based On Welfare Loss

An overall view of history, disaster is a serious problem on foot to social stability and political order. The influence on social and economic life from disaster is not limited to cause material damage, but also be uncertainly for our future. This uncertainty could lead consumers to smoothing loss though changing their original plan consumption and investment. Although these behaviors can relieve stress after disaster, but can be resulting in welfare losses. Perhaps we can divide welfare losses roughly into two types:direct welfare loss and indirect welfare loss. Of course, we can make up this loss by disaster relief which is at the cost of other buildings. So, how many disaster reliefs that we need to prepare to reduce the loss as much as possible? This question is not only related to the relief cost, but also be an important sector during process of constructing disaster relief system. Hereby, the study takes estimating the welfare loss as the main thread to analyze China’s disaster relief system. The structure of this study is as follows.The first part is the introduction.And then; the second part is a research about the economic impact and welfare loss of disaster risk. The study clarifies the formation mechanism of welfare loss though sort out the economic impact categories of disaster risk and discuss the relationship between them gradually. Then, we estimated the detail welfare loss based on China’s disaster actuality.Chapter three analyzes the welfare loss related to disaster relief and calculates the optimal relief size. Based on reviewing the feature and function for disaster relief, we construct a stochastic decision equation incorporating catastrophe risk, and then give an optimal-decision model of disaster relief by theory deduction. Using the valid data, we employ the model in numerical analysis to discuss the optimal disaster relief policies in different situation. The main finding of this paper is that, the optimal disaster relief policy that has been influenced by the parameters of actual economies is the product of coordinating between welfare effect of policy and budget constraint. Numerical value of optimal relief ratio/amount is determined by the replication of risk preference, economic losses and investment efficiency. Frequent disaster affect the social welfare negatively despite it has little influence on the optimal disaster relief policy.The fourth chapter analyzes China’s response capability for disaster risk from the perspective of public finance. Firstly, we review the history of China’s disaster relief system to understanding it’s characteristics. And then, we discuss the associated variation and related factors for disaster relief funds according to the actual data. On that basis, we check if the financial capacity which we can affordable is matched to the optimal relief policy. Our findings show that the important role of China’s government for disaster risk management. Currently, it has established an mature system of disaster relief in China. Accompanying, we can find that the government disaster relief expenditure has been increased significantly. The empirical results indicate that the finance revenue, casualty rates, and direct economic loss of disaster are the important factors for relief policy. After analyzing the related budget in 2008 and 2009, we think that there is big different between current capacity of China’s government and the optimal relief policy.Then, we do the same work from market version in the fifth chapter. In this part, by using the theory of risk management, the role and status of insurance in disaster management was discussed firstly, and then the background in developing disaster insurance was analyzed by combining the reality of china’s insurance market, current solvency for disaster loss was evaluated finally. The results show that the insurance is not the only financing instrument for disaster risk, but is almost accepted by society then others. Insurance is an irreplaceable link in risk management depending on its own functions. There are countries have established the catastrophe insurance system which can be divided into 3 forms, government Dominance, market dominance and public-private program.In our country, the current market size is enough to develop catastrophe insurance, except the lack of disaster risk management techniques. Although there is an ability in property insurance market to support optimal policy partly, it is strong uncertainty and has been influenced by other factors greatly. From this, we can’t expect insurance industry to meet relief needs to the full.Based on the problems arisen in the previous two chapters, we suggest that the disaster relief from government should be connected with the disaster damage payments from insurance in order to achieve the optimal relief policy in chapter 6. We first encounter the conflict between government relief and insurance payment and seek the linkage between them. Then we design related system that covering the relief scope, financing source, operating method and supervision by following four principles.Chapter 7 is a conclusion. We sum up the results and the inadequacies in this study, and discuss the future directions for further research.