Abstract
This paper builds a dynamic stochastic macroeconomic model which deals with investment to disaster prevention infrastructure stock. The nature of disaster such as uncertainty, magnitude of damage and long run effects of damage are explicitly modeled. The model can derive optimal policy with regard to investment to productive capital stock and disaster prevention infrastructure stock. Furthermore, the numerical simulations give some interesting implications about the relationship between optimal investment policy, magnitude of disaster, level of economic development and disaster prevention technology.
