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The Effects of Natural Disasters on Human Capital Accumulation

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  • Thomas K.J. McDermott

    () (School of Business and Institute for International Integration Studies, Trinity College Dublin)

Abstract

In this paper I investigate the effects of disasters on human capital accumulation using an extensive panel dataset on natural disasters, covering 170 countries over a 25 year period (1980-2004). My analysis shows that disasters have both a direct, contemporaneous effect and a long-term, indirect effect on human capital. While the direct effects - primarily related to injury, illness and death suffered as a result of the disaster - are relatively straightforward, the indirect effects will depend on household decision-making in the aftermath of the disaster. Treating human capital as a long-term investment decision, it is clear that access to finance is likely to be a crucial factor in household decisions about whether or not to invest in children's health and education. Indeed, my results show that aid flows are effective in mitigating the long-term impacts of disasters on health outcomes. However, for school enrollment rates, the longer-term effects of disasters are dependent on the availability of credit. These findings could have important policy implications. The indirect effects are unlikely to have been identified in previous analyses that focus on the short-term impacts of natural disasters. Given the importance of human capital in the process of economic development, the results presented here suggest that natural disasters represent a significant threat to the development prospects of relatively poor countries.

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Bibliographic Info

Paper provided by IIIS in its series The Institute for International Integration Studies Discussion Paper Series with number iiisdp391.

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Length: 35 pages
Date of creation: Nov 2011
Date of revision: Feb 2012
Handle: RePEc:iis:dispap:iiisdp391

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Keywords: natural disasters; epidemics; human capital; credit markets; development;

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Cited by:
  1. Wenzel, Lars & Wolf, André, 2013. "Protection against major catastrophes: An economic perspective," HWWI Research Papers 137, Hamburg Institute of International Economics (HWWI).

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