Do Natural Disasters Have Long-term Effects on Growth?
AbstractLarge natural disasters (LNDs) are ubiquitous phenomena with potentially large impacts on the infrastructure and population of countries and on their economic activity in general. Using a panel of 113 countries and 36 years of data, I examine the relationship between different measures of natural disaster impact and long-run economic growth. The sample is partitioned in two separate ways: according to the amount and type of disasters that countries have experienced and to the size of those disasters. For each partition, I present two sets of econometric estimations. The first regressions identify short-run and longer-lasting effects of LNDs. However, these first estimations do not distinguish between temporary but persistent effects and truly permanent ones. I thus estimate a structural model that allows me to identify permanent changes. The results of the first regressions show that for some of the groups of countries the disaster impact persists beyond the 2-5 years in which reconstruction and adaptation are expected to have an effect on the economy. However, the estimates using the structural model show that only for a very small number of countries which share a history of highly devastating natural disasters the negative effects are truly permanent.
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This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-02-13 (All new papers)
- NEP-DEV-2010-02-13 (Development)
- NEP-ENV-2010-02-13 (Environmental Economics)
- NEP-FDG-2010-02-13 (Financial Development & Growth)
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