IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

Natural Disasters and Growth: Going Beyond the Averages

  • Loayza, Norman V.
  • Olaberría, Eduardo
  • Rigolini, Jamele
  • Christiaensen, Luc

Despite the tremendous human suffering caused by natural disasters, their effects on economic growth remain unclear, with some studies reporting negative, and others indicating no or even positive effects. To reconcile these seemingly contradictory findings reported in the literature, this study explores the effects of natural disasters on growth separately by disaster and economic sector. Applying a dynamic generalized method of moments panel estimator to a 1961–2005 cross-country panel dataset, three major insights emerge. First, disasters do affect economic growth but not always negatively, with effects that differ across types of disasters and economic sectors. Second, although moderate disasters (such as moderate floods) can have a positive growth effect in some sectors, severe disasters do not. Third, growth in developing countries is more sensitive to natural disasters than in developed ones, with more sectors affected and the effects larger and economically meaningful.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.sciencedirect.com/science/article/pii/S0305750X12000393
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by Elsevier in its journal World Development.

Volume (Year): 40 (2012)
Issue (Month): 7 ()
Pages: 1317-1336

as
in new window

Handle: RePEc:eee:wdevel:v:40:y:2012:i:7:p:1317-1336
Contact details of provider: Web page: http://www.elsevier.com/locate/worlddev

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Ilan Noy, 2007. "The Macroeconomic Consequences of Disasters," Working Papers 200707, University of Hawaii at Manoa, Department of Economics.
  2. Richard Blundell & Steve Bond, 1995. "Initial conditions and moment restrictions in dynamic panel data models," IFS Working Papers W95/17, Institute for Fiscal Studies.
  3. Ross Levine & Norman Loayza & Thorsten Beck, 2002. "Financial Intermediation and Growth: Causality and Causes," Central Banking, Analysis, and Economic Policies Book Series, in: Leonardo Hernández & Klaus Schmidt-Hebbel & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Se (ed.), Banking, Financial Integration, and International Crises, edition 1, volume 3, chapter 2, pages 031-084 Central Bank of Chile.
  4. Julie Zissimopoulos & Lynn A. Karoly, 2007. "Employment and Self-Employment in the Wake of Hurricane Katrina," Working Papers 525, RAND Corporation Publications Department.
  5. Zvi Griliches & Jerry A. Hausman, 1984. "Errors in Variables in Panel Data," NBER Technical Working Papers 0037, National Bureau of Economic Research, Inc.
  6. Holtz-Eakin, Douglas & Newey, Whitney & Rosen, Harvey S, 1988. "Estimating Vector Autoregressions with Panel Data," Econometrica, Econometric Society, vol. 56(6), pages 1371-95, November.
  7. Paolo Mauro & Törbjörn I. Becker, 2006. "Output Drops and the Shocks That Matter," IMF Working Papers 06/172, International Monetary Fund.
  8. Lant Pritchett, 1997. "Divergence, Big Time," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 3-17, Summer.
  9. Jesus Crespo Cuaresma, 2010. "Natural Disasters and Human Capital Accumulation," World Bank Economic Review, World Bank Group, vol. 24(2), pages 280-302, July.
  10. Stefan Dercon, 2003. "Growth and Shocks: evidence from rural Ethiopia," Economics Series Working Papers WPS/2003-12, University of Oxford, Department of Economics.
  11. Hallegatte, Stéphane & Dumas, Patrice, 2009. "Can natural disasters have positive consequences? Investigating the role of embodied technical change," Ecological Economics, Elsevier, vol. 68(3), pages 777-786, January.
  12. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
  13. Harold Alderman & John Hoddinott & Bill Kinsey, 2006. "Long term consequences of early childhood malnutrition," Oxford Economic Papers, Oxford University Press, vol. 58(3), pages 450-474, July.
  14. Seema Jayachandran, 2005. "Selling Labor Low: Wage Responses to Productivity Shocks in Developing Countries," UCLA Economics Online Papers 370, UCLA Department of Economics.
  15. Tobias N. Rasmussen, 2004. "Macroeconomic Implications of Natural Disasters in the Caribbean," IMF Working Papers 04/224, International Monetary Fund.
  16. Eswar S. Prasad & Raghuram G. Rajan & Arvind Subramanian, 2007. "Foreign Capital and Economic Growth," NBER Working Papers 13619, National Bureau of Economic Research, Inc.
  17. David Roodman, 2007. "A Note on the Theme of Too Many Instruments," Working Papers 125, Center for Global Development.
  18. Albala-Bertrand, J. M., 1993. "Political Economy of Large Natural Disasters: With Special Reference to Developing Countries," OUP Catalogue, Oxford University Press, number 9780198287650, March.
  19. Raddatz, Claudio, 2007. "Are external shocks responsible for the instability of output in low-income countries?," Journal of Development Economics, Elsevier, vol. 84(1), pages 155-187, September.
  20. Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, vol. 68(1), pages 29-51, July.
  21. World Bank, 2007. "World Development Indicators 2007," World Bank Publications, The World Bank, number 8150.
  22. Durlauf, Steven N. & Johnson, Paul A. & Temple, Jonathan R.W., 2005. "Growth Econometrics," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 8, pages 555-677 Elsevier.
  23. Carter, Michael R. & Little, Peter D. & Mogues, Tewodaj & Negatu, Workneh, 2007. "Poverty Traps and Natural Disasters in Ethiopia and Honduras," World Development, Elsevier, vol. 35(5), pages 835-856, May.
  24. Paul M Romer, 1999. "Endogenous Technological Change," Levine's Working Paper Archive 2135, David K. Levine.
  25. Calderon, Cesar & Loayza, Norman & Schmidt-Hebbel, Klaus, 2005. "Does openness imply greater exposure ?," Policy Research Working Paper Series 3733, The World Bank.
  26. Alonso-Borrego, Cesar & Arellano, Manuel, 1999. "Symmetrically Normalized Instrumental-Variable Estimation Using Panel Data," Journal of Business & Economic Statistics, American Statistical Association, vol. 17(1), pages 36-49, January.
  27. Lopez, Ramon, 2009. "Natural disasters and the dynamics of intangible assets," Policy Research Working Paper Series 4874, The World Bank.
  28. David Dollar & Aart Kraay, 2004. "Trade, Growth, and Poverty," Economic Journal, Royal Economic Society, vol. 114(493), pages F22-F49, 02.
  29. Haggblade, Steven & Hazell, Peter B. R. & Reardon, Thomas, 2009. "Transforming the rural nonfarm economy: Opportunities and threats in the developing world," Issue briefs 58, International Food Policy Research Institute (IFPRI).
  30. 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.
  31. Christiaensen, Luc & Demery, Lionel & Kuhl, Jesper, 2011. "The (evolving) role of agriculture in poverty reduction--An empirical perspective," Journal of Development Economics, Elsevier, vol. 96(2), pages 239-254, November.
  32. Hallegatte, Stephane & Przyluski, Valentin, 2010. "The economics of natural disasters : concepts and methods," Policy Research Working Paper Series 5507, The World Bank.
  33. Loayza, Norman V. & Raddatz, Claudio, 2010. "The composition of growth matters for poverty alleviation," Journal of Development Economics, Elsevier, vol. 93(1), pages 137-151, September.
  34. John G. McPeak & Christopher B. Barrett, 2001. "Differential Risk Exposure and Stochastic Poverty Traps Among East African Pastoralists," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(3), pages 674-679.
  35. Christian R. Jaramillo H., 2007. "Natural disasters and growth: evidence using a wide panel of countries," DOCUMENTOS CEDE 003927, UNIVERSIDAD DE LOS ANDES-CEDE.
  36. Alexander W. Hoffmaister, 1997. "Macroeconomic Fluctuations in Sub-Saharan Africa," IMF Working Papers 97/82, International Monetary Fund.
  37. 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.
  38. Christiaensen, Luc. J. & Subbarao, Kalanidhi, 2004. "Toward an understanding of household vulnerability in rural Kenya," Policy Research Working Paper Series 3326, The World Bank.
  39. Andrea Leiter & Harald Oberhofer & Paul Raschky, 2009. "Creative Disasters? Flooding Effects on Capital, Labour and Productivity Within European Firms," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 43(3), pages 333-350, July.
  40. Matthew E. Kahn, 2005. "The Death Toll from Natural Disasters: The Role of Income, Geography, and Institutions," The Review of Economics and Statistics, MIT Press, vol. 87(2), pages 271-284, May.
  41. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 277-97, April.
  42. Campbell, John & Mankiw, Gregory, 1987. "Are Output Fluctuations Transitory?," Scholarly Articles 3122545, Harvard University Department of Economics.
  43. Azariadis, Costas & Drazen, Allan, 1990. "Threshold Externalities in Economic Development," The Quarterly Journal of Economics, MIT Press, vol. 105(2), pages 501-26, May.
  44. Costanza, Robert & Farley, Joshua, 2007. "Ecological economics of coastal disasters: Introduction to the special issue," Ecological Economics, Elsevier, vol. 63(2-3), pages 249-253, August.
  45. Toya, Hideki & Skidmore, Mark, 2007. "Economic development and the impacts of natural disasters," Economics Letters, Elsevier, vol. 94(1), pages 20-25, January.
  46. Hallegatte, Stephane & Hourcade, Jean-Charles & Dumas, Patrice, 2007. "Why economic dynamics matter in assessing climate change damages: Illustration on extreme events," Ecological Economics, Elsevier, vol. 62(2), pages 330-340, April.
  47. Crespo Cuaresma & Hlouskova & Obersteiner, 2008. "Natural Disasters As Creative Destruction? Evidence From Developing Countries," Economic Inquiry, Western Economic Association International, vol. 46(2), pages 214-226, 04.
  48. Foster, Andrew D, 1995. "Prices, Credit Markets and Child Growth in Low-Income Rural Areas," Economic Journal, Royal Economic Society, vol. 105(430), pages 551-70, May.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:eee:wdevel:v:40:y:2012:i:7:p:1317-1336. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.