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How do natural disasters affect services trade?

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  • Xu, Ankai
  • Kouwoaye, Amèvi Rocard

Abstract

This paper is the first in the literature to examine the impact of natural disasters on trade in services. We measure the magnitude of natural disasters using two distinct sets of variables and quantify the effect of natural disasters on trade in services using a structural gravity model. We find that, overall, natural disasters lead to a decline of services exports of the affected country but have ambiguous effects on its services imports. On average, a large natural disaster can reduce services exports by 2% to 3%. Capital-intensive service sectors such as transport and communications are most affected by a large natural disaster, with the negative impact on communications exports lasting for up to five years after a disaster. We also find consistently across all estimations that the negative impact of natural disasters on services trade is larger than that on merchandise trade.

Suggested Citation

  • Xu, Ankai & Kouwoaye, Amèvi Rocard, 2019. "How do natural disasters affect services trade?," WTO Staff Working Papers ERSD-2019-12, World Trade Organization (WTO), Economic Research and Statistics Division.
    • Handle: RePEc:zbw:wtowps:ersd201912
    DOI: 10.30875/5e1a55a2-en
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    References listed on IDEAS

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    4. Andrade da Silva, Jorge & Cernat, Lucian, 2012. "Coping with loss: the impact of natural disasters on developing countries' trade flows," DG TRADE Chief Economist Notes 2012-1, Directorate General for Trade, European Commission.
    5. Richard Baldwin & Daria Taglioni, 2006. "Gravity for Dummies and Dummies for Gravity Equations," NBER Working Papers 12516, National Bureau of Economic Research, Inc.
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    7. Costas Arkolakis & Arnaud Costinot & Andres Rodriguez-Clare, 2012. "New Trade Models, Same Old Gains?," American Economic Review, American Economic Association, vol. 102(1), pages 94-130, February.
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    Cited by:

    1. Längle, Katharina & Xu, Ankai & Tian, Ruijie, 2021. "Assessing the supply chain effect of natural disasters: Evidence from Chinese manufacturers," WTO Staff Working Papers ERSD-2021-13, World Trade Organization (WTO), Economic Research and Statistics Division.
    2. Zhao, Xin-Xin & Zheng, Mingbo & Fu, Qiang, 2022. "How natural disasters affect energy innovation? The perspective of environmental sustainability," Energy Economics, Elsevier, vol. 109(C).

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    More about this item

    Keywords

    international trade; gravity model; services; natural disasters; climate change;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • P48 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies
    • L80 - Industrial Organization - - Industry Studies: Services - - - General
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • H84 - Public Economics - - Miscellaneous Issues - - - Disaster Aid

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