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The growth aftermath of natural disasters

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Author Info

  • Fomby, Thomas
  • Ikeda, Yuki
  • Loayza, Norman

Abstract

This paper provides a description of the macroeconomic aftermath of natural disasters. It traces the yearly response of gross domestic product growth - both aggregated and disaggregated into its agricultural and non-agricultural components - to four types of natural disasters - droughts, floods, earthquakes, and storms. The paper uses a methodological approach based on pooling the experiences of various countries over time. It consists of vector auto-regressions in the presence of endogenous variables and exogenous shocks (VARX), applied to a panel of cross-country and time-series data. The analysis finds heterogeneous effects on a variety of dimensions. First, the effects of natural disasters are stronger, for better or worse, on developing than on rich countries. Second, while the impact of some natural disasters can be beneficial when they are of moderate intensity, severe disasters never have positive effects. Third, not all natural disasters are alike in terms of the growth response they induce, and, perhaps surprisingly, some can entail benefits regarding economic growth. Thus, droughts have a negative effect on both agricultural and non-agricultural growth. In contrast, floods tend to have a positive effect on economic growth in both major sectors. Earthquakes have a negative effect on agricultural growth but a positive one on non-agricultural growth. Storms tend to have a negative effect on gross domestic product growth but the effect is short-lived and small. Future research should concentrate on exploring the mechanisms behind these heterogeneous impacts.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 5002.

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Date of creation: 01 Jul 2009
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Handle: RePEc:wbk:wbrwps:5002

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Related research

Keywords: Natural Disasters; Disaster Management; Hazard Risk Management; Achieving Shared Growth; Economic Conditions and Volatility;

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Citations

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Cited by:
  1. Nicole Laframboise & Boileau Loko, 2012. "Natural Disasters," IMF Working Papers 12/245, International Monetary Fund.
  2. Eduardo Cavallo & Ilan Noy, 2009. "The Economics of Natural Disasters: A Survey," Research Department Publications 4649, Inter-American Development Bank, Research Department.
  3. Scott R. Baker & Nicholas Bloom, 2013. "Does Uncertainty Reduce Growth? Using Disasters as Natural Experiments," CEP Discussion Papers dp1243, Centre for Economic Performance, LSE.
  4. Melissa Dell & Benjamin F. Jones & Benjamin A. Olken, 2013. "What Do We Learn from the Weather? The New Climate-Economy Literature," NBER Working Papers 19578, National Bureau of Economic Research, Inc.
  5. Suman K SHARMA, 2010. "Socio-Economic Aspects of Disaster’s Impact: An Assessment of Databases and Methodologies," Economic Growth centre Working Paper Series 1001, Nanyang Technolgical University, School of Humanities and Social Sciences, Economic Growth centre.
  6. Goetz von Peter & Sebastian von Dahlen & Sweta C Saxena, 2012. "Unmitigated disasters? New evidence on the macroeconomic cost of natural catastrophes," BIS Working Papers 394, Bank for International Settlements.
  7. Martina Kirchberger, 2014. "Natural disasters and labour markets," CSAE Working Paper Series 2014-19, Centre for the Study of African Economies, University of Oxford.
  8. Ghimire, Ramesh & Ferreira, Susana, 2013. "Economic Shocks and Civil Conflict: The Case of Large Floods," 2013 Annual Meeting, February 2-5, 2013, Orlando, Florida 142587, Southern Agricultural Economics Association.
  9. Hevia, Constantino, 2012. "Using pooled information and bootstrap methods to assess debt sustainability in low income countries," Policy Research Working Paper Series 5978, The World Bank.
  10. Matthew A. Cole & Robert J R Elliott & Toshihiro Okubo & Eric Strobl, 2014. "Natural Disasters and the Birth, Life and Death of Plants: The Case of the Kobe Earthquake," Working Papers 2014-114, Department of Research, Ipag Business School.
  11. Hallegatte, Stephane, 2012. "An exploration of the link between development, economic growth, and natural risk," Policy Research Working Paper Series 6216, The World Bank.
  12. Holger Strulik & Timo Trimborn, 2014. "Natural disasters and macroeconomic performance: The role of residential investment," Center for European, Governance and Economic Development Research Discussion Papers 194, University of Goettingen, Department of Economics.
  13. 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.
  14. Rémi Generoso, 2012. "Transferts de fonds et résilience des pays d'Afrique de l'Ouest face à la variabilité des précipitations : une perspective macroéconomique," Working Papers hal-00830021, HAL.
  15. Güneş Kamber & Chris McDonald & Gael Price, 2013. "Drying out: Investigating the economic effects of drought in New Zealand," Reserve Bank of New Zealand Analytical Notes series AN2013/02, Reserve Bank of New Zealand.
  16. Matthew A. COLE & Robert J R ELLIOTT & OKUBO Toshihiro & Eric STROBL, 2013. "Natural Disasters and Plant Survival: The impact of the Kobe earthquake," Discussion papers 13063, Research Institute of Economy, Trade and Industry (RIETI).
  17. Gabriel J. Felbermayr & Jasmin Gröschl, 2013. "Naturally Negative: The Growth Effects of Natural Disasters," CESifo Working Paper Series 4439, CESifo Group Munich.
  18. Ansgar Belke, 2013. "Natural disaster in Japan: implications for world financial markets," Asia Europe Journal, Springer, vol. 11(4), pages 433-444, December.
  19. F. Coelli & P. Manasse, 2014. "The impact of floods on firms' performance," Working Papers wp946, Dipartimento Scienze Economiche, Universita' di Bologna.
  20. 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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