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Aggregate Impacts of Natural and Man-made Disasters: A quantitative comparison

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  • SAWADA Yasuyuki
  • Rima BHATTCHARYAY
  • KOTERA Tomoaki

Abstract

In recent decades, the world has faced an increasing number of natural and man-made disasters. Such disasters include tsunamis, earthquakes, the current ongoing financial crisis, terrorism, riots, and wars. These disasters generate tremendous social and economic costs, especially for the poor in low income economies. This paper assesses and compares the impacts of various natural and man-made disasters quantitatively. We carefully construct cross-country panel data of 189 countries within the range between 1968 to 2001 on a wide variety of natural disasters such as hydro-meteorological, geophysical, climatological, technological and biological disasters as well as man-made disasters such as economic crises, civil conflicts and wars. The paper employs this unique panel dataset to estimate econometric models which enable us to quantify and compare the impacts of different natural and man-made disasters on welfare as captured by per capita consumption. According to our estimation results, in the short term, natural disasters generate the largest negative welfare impacts which are followed by wars and economic disasters. Intriguingly, in the long term, natural disasters and wars have positive impacts on per capita GDP growth. Wars affect large economies more than small economies while natural disasters affect small economies disproportionately.

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Bibliographic Info

Paper provided by Research Institute of Economy, Trade and Industry (RIETI) in its series Discussion papers with number 11023.

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Length: 43 pages
Date of creation: Mar 2011
Date of revision:
Handle: RePEc:eti:dpaper:11023

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  1. S. Brock Blomberg & Gregory D. Hess & Athanasios Orphanides, 2004. "The Macroeconomic Consequences of Terrorism," CESifo Working Paper Series 1151, CESifo Group Munich.
  2. Peter R. Fallon & Robert E. B. Lucas, 2000. "The Impact of Financial Crises on Labor Markets, Household Incomes and Poverty: A Review of Evidence," Boston University - Institute for Economic Development 103, Boston University, Institute for Economic Development.
  3. Sung Jin Kang & Yasuyuki Sawada, 2008. "Credit Crunch And Household Welfare, The Case Of The Korean Financial Crisis," The Japanese Economic Review, Japanese Economic Association, vol. 59(4), pages 438-458.
  4. Mark Skidmore & Hideki Toya, 2005. "Economic Development and the Impacts of Natural Disasters," Working Papers 05-04, UW-Whitewater, Department of Economics.
  5. Mark Skidmore & Hideki Toya, 2002. "Do Natural Disasters Promote Long-Run Growth?," Economic Inquiry, Western Economic Association International, vol. 40(4), pages 664-687, October.
  6. Graciela L. Kaminsky & Carmen M. Reinhart, 1996. "The twin crises: the causes of banking and balance-of-payments problems," International Finance Discussion Papers 544, Board of Governors of the Federal Reserve System (U.S.).
  7. Robert J. Barro, 2007. "Rare Disasters, Asset Prices, and Welfare Costs," NBER Working Papers 13690, National Bureau of Economic Research, Inc.
  8. Ravallion, Martin & Lokshin, Michael, 2005. "Lasting local impacts of an economywide crisis," Policy Research Working Paper Series 3503, The World Bank.
  9. Stéphane Hallegatte & Valentin Przyluski, 2010. "The Economics of Natural Disasters," CESifo Forum, Ifo Institute for Economic Research at the University of Munich, vol. 11(2), pages 14-24, 07.
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