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Catastrophic Natural Disasters and Economic Growth

  • Eduardo Cavallo

    (Inter-American Development Bank)

  • Sebastian Galiani

    (University of Maryland)

  • Ilan Noy

    (University of Hawaii and Victoria University of Wellington)

  • Juan Pantano

    (Washington University in St. Louis)

We examine the average causal impact of catastrophic natural disasters on economic growth by combining information from comparative case studies. For each country affected by a large disaster, we compute the counterfactual by constructing synthetic controls. We find that only extremely large disasters have a negative effect on output in both the short and the long runs. However, we also show that this results from two events where radical political revolutions followed the disasters. Once we control for these political changes, even extremely large disasters do not display any significant effect on economic growth. © 2013 The President and Fellows of Harvard College and the Massachusetts Institute of Technology.

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Article provided by MIT Press in its journal Review of Economics and Statistics.

Volume (Year): 95 (2013)
Issue (Month): 5 (December)
Pages: 1549-1561

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Handle: RePEc:tpr:restat:v:95:y:2013:i:5:p:1549-1561
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  1. Acemoglu, Daron & Johnson, Simon & Robinson, James A., 2005. "Institutions as a Fundamental Cause of Long-Run Growth," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 6, pages 385-472 Elsevier.
  2. Eduardo A. Cavallo & Ilan Noy, 2009. "The Economics of Natural Disasters: A Survey," IDB Publications (Working Papers) 6779, Inter-American Development Bank.
  3. Noy, Ilan, 2009. "The macroeconomic consequences of disasters," Journal of Development Economics, Elsevier, vol. 88(2), pages 221-231, March.
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  8. Mankiw, N Gregory & Romer, David & Weil, David N, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 407-37, May.
  9. Yang Dean, 2008. "Coping with Disaster: The Impact of Hurricanes on International Financial Flows, 1970-2002," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 8(1), pages 1-45, June.
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  11. Abadie, Alberto & Diamond, Alexis & Hainmueller, Jens, 2010. "Synthetic Control Methods for Comparative Case Studies: Estimating the Effect of California’s Tobacco Control Program," Journal of the American Statistical Association, American Statistical Association, vol. 105(490), pages 493-505.
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