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Unmitigated Disasters? Risk Sharing and Macroeconomic Recovery in a Large International Panel

In: NBER International Seminar on Macroeconomics 2023

Author

Listed:
  • Goetz von Peter
  • Sebastian von Dahlen
  • Sweta Saxena

Abstract

This paper examines the patterns of macroeconomic recovery following natural disasters. In a panel with global coverage from 1960 to 2011, we make use of insurer-assessed losses to estimate growth responses conditional on risk transfer. We find that major disasters reduce growth by 1 to 2 percentage points on impact, and over time produce an output cost of 2% to 4% of GDP, on top of the initial damage to property and infrastructure. Akin to wars and financial crises, natural disasters have permanent effects, in the sense that output losses are not fully recovered over time. But it is the uninsured losses that drive the macroeconomic cost; insured losses are less consequential in the aggregate, and can even stimulate growth. By helping to finance the recovery, insurance mitigates the macroeconomic cost of disasters. Many countries lack the capacity to (re)insure themselves and would stand to benefit from international risk sharing.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Goetz von Peter & Sebastian von Dahlen & Sweta Saxena, 2023. "Unmitigated Disasters? Risk Sharing and Macroeconomic Recovery in a Large International Panel," NBER Chapters, in: NBER International Seminar on Macroeconomics 2023, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberch:15040
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    Cited by:

    1. is not listed on IDEAS
    2. Torsten Ehlers & Jon Frost & Carlos Madeira & Ilhyock Shim, 2025. "Macroeconomic impact of extreme weather events," BIS Bulletins 98, Bank for International Settlements.
    3. Douglas Kiarelly Godoy de Araujo & Fernando Linardi & Luis Vissotto, 2025. "Supply chain transmission of climate-related physical risks," BIS Working Papers 1260, Bank for International Settlements.
    4. Torsten Ehlers & Jon Frost & Carlos Madeira & Ilhyock Shim, 2025. "Macroeconomic impact of weather disasters: a global and sectoral analysis," BIS Working Papers 1292, Bank for International Settlements.
    5. Bodenstein, Martin & Scaramucci, Mikaël, 2025. "On the GDP effects of severe physical hazards," European Economic Review, Elsevier, vol. 175(C).

    More about this item

    JEL classification:

    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O44 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Environment and Growth
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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