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Fiscal Storms: Public Spending and Revenues in the Aftermath of Natural Disasters

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  • Ilan Noy

    ()
    (Department of Economics, University of Hawaii at Manoa)

  • Aekkanush Nualsri

    ()
    (Department of Economics, University of Hawaii at Manoa)

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Abstract

Recent research in both the social and natural sciences has been devoted to increasing our ability to predict disasters, prepare for them and mitigate their costs. Curiously, we appear to know very little about the fiscal consequences of disasters. The likely fiscal impact of a natural disaster has not been examined before in any comparable or comparative framework. We estimate and quantify the fiscal consequences of natural disasters using quarterly fiscal and disaster data for a large panel of countries. In our estimations, we employ a panel VAR framework that is similar to Burnside et al. (Journal of Economic Theory, 2004), that also controls for the business cycle. We find fiscal behavior in the aftermath of disasters in developed countries that can best be characterized as counter-cyclical. In contrast, we find pro-cyclical decreased spending and increasing revenues in developing countries following large natural disasters. We quantify these effects.

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File URL: http://www.economics.hawaii.edu/research/workingpapers/WP_08-9.pdf
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Bibliographic Info

Paper provided by University of Hawaii at Manoa, Department of Economics in its series Working Papers with number 200809.

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Length: 27
Date of creation: 01 Dec 2008
Date of revision:
Handle: RePEc:hai:wpaper:200809

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Keywords: natural disasters; fiscal policy;

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Cited by:
  1. Makena Coffman & Ilan Noy, 2009. "A Hurricane’s Long-Term Economic Impact: the Case of Hawaii’s Iniki," Working Papers 200905, University of Hawaii at Manoa, Department of Economics.
  2. Kousky, Carolyn, 2012. "Informing Climate Adaptation: A Review of the Economic Costs of Natural Disasters, Their Determinants, and Risk Reduction Options," Discussion Papers dp-12-28, Resources For the Future.
  3. Noy, Ilan & Vu, Tam Bang, 2010. "The economics of natural disasters in a developing country: The case of Vietnam," Journal of Asian Economics, Elsevier, vol. 21(4), pages 345-354, August.
  4. Makena Coffman & Ilan Noy, 2009. "In the Eye of the Storm: Coping with Future Natural Disasters in Hawaii," Working Papers 200904, University of Hawaii at Manoa, Department of Economics.
  5. Noy, Ilan, 2012. "Natural disasters and economic policy for the Pacific Rim," Working Paper Series 2088, Victoria University of Wellington, School of Economics and Finance.
  6. Thomas K.J. McDermott, . "Disasters and Development: Natural Disasters, Credit Constraints and Economic Growth," The Institute for International Integration Studies Discussion Paper Series iiisdp363, IIIS.
  7. Eduardo Cavallo & Ilan Noy, 2009. "The Economics of Natural Disasters: A Survey," Research Department Publications 4649, Inter-American Development Bank, Research Department.
  8. Eduardo Cavallo & Ilan Noy, 2010. "The Aftermath of Natural Disasters: Beyond Destruction," CESifo Forum, Ifo Institute for Economic Research at the University of Munich, vol. 11(2), pages 25-35, 07.

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