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How do natural and man-made disasters affect international trade? A country-level and industry-level analysis

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  • Chang Hoon Oh

Abstract

This study examines the influence of disasters on international trade with a gravity equation model. Four types of disasters will be introduced: natural disasters, technological disasters, political risks, and financial crises. Existing literature implies that any type of disasters can either positively or negatively associated with international trade. The effects of disasters are different across the socioeconomic status of trade pairs and across industries as well as across different types of disasters. Results from country-level and industry-level show that natural disasters reduce international trade flows by raising trading and security costs and hardening borders. In contrast to previous findings, these results show that terrorism activities and technological disasters increase the international trade particularly between developed countries. The econometric specification controls unobserved characteristics of trade pairs and endogeneity problems. Managerial implications and future research are discussed.

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  • Chang Hoon Oh, 2017. "How do natural and man-made disasters affect international trade? A country-level and industry-level analysis," Journal of Risk Research, Taylor & Francis Journals, vol. 20(2), pages 195-217, February.
    • Handle: RePEc:taf:jriskr:v:20:y:2017:i:2:p:195-217
    DOI: 10.1080/13669877.2015.1042496
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    1. Nicolas Berman, 2009. "Financial Crises and International Trade: The Long Way to Recovery," Economics Working Papers ECO2009/23, European University Institute.
    2. Mr. Tobias N. Rasmussen, 2004. "Macroeconomic Implications of Natural Disasters in the Caribbean," IMF Working Papers 2004/224, International Monetary Fund.
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    Cited by:

    1. Quy Ta & Yothin Jinjarak & Ilan Noy, 2022. "“How Do Shocks Affect International Reserves? A Quasi-Experiment of Earthquakes”," Open Economies Review, Springer, vol. 33(5), pages 945-971, November.
    2. Mohan, Preeya, 2023. "The Impact of Tropical Storms on International Trade: Evidence from Eastern Caribbean Small Island Developing States," IDB Publications (Working Papers) 13084, Inter-American Development Bank.
    3. Osberghaus, Daniel, 2019. "The effects of natural disasters and weather variations on international trade: A review of the empirical literature," ZEW Discussion Papers 19-002, ZEW - Leibniz Centre for European Economic Research.
    4. Preeya S. Mohan, 2023. "The Impact of Tropical Storms on International Trade: Evidence from Eastern Caribbean Small Island Developing States," Economics of Disasters and Climate Change, Springer, vol. 7(2), pages 179-208, July.
    5. Daniel Osberghaus, 2019. "The Effects of Natural Disasters and Weather Variations on International Trade and Financial Flows: a Review of the Empirical Literature," Economics of Disasters and Climate Change, Springer, vol. 3(3), pages 305-325, October.
    6. Oh, Chang Hoon & Shin, Jiyoung & Oetzel, Jennifer, 2021. "How does experience change firms' foreign investment decisions to non-market events?," Journal of International Management, Elsevier, vol. 27(1).
    7. Sandi, Eleni, 2021. "Estimating the Impact of Natural Disasters on Caribbean Exports," Warwick-Monash Economics Student Papers 03, Warwick Monash Economics Student Papers.

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