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Fiscal Storms: Public Spending and Revenues in the Aftermath of Natural Disasters

Author

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  • Ilan Noy

    () (Department of Economics, University of Hawaii at Manoa)

  • Aekkanush Nualsri

    () (Department of Economics, University of Hawaii at Manoa)

Abstract

Recent research in both the social and natural sciences has been devoted to increasing our ability to predict disasters, prepare for them and mitigate their costs. Curiously, we appear to know very little about the fiscal consequences of disasters. The likely fiscal impact of a natural disaster has not been examined before in any comparable or comparative framework. We estimate and quantify the fiscal consequences of natural disasters using quarterly fiscal and disaster data for a large panel of countries. In our estimations, we employ a panel VAR framework that is similar to Burnside et al. (Journal of Economic Theory, 2004), that also controls for the business cycle. We find fiscal behavior in the aftermath of disasters in developed countries that can best be characterized as counter-cyclical. In contrast, we find pro-cyclical decreased spending and increasing revenues in developing countries following large natural disasters. We quantify these effects.

Suggested Citation

  • Ilan Noy & Aekkanush Nualsri, 2008. "Fiscal Storms: Public Spending and Revenues in the Aftermath of Natural Disasters," Working Papers 200809, University of Hawaii at Manoa, Department of Economics.
  • Handle: RePEc:hai:wpaper:200809
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    File URL: http://www.economics.hawaii.edu/research/workingpapers/WP_08-9.pdf
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    Cited by:

    1. repec:aea:aejpol:v:9:y:2017:i:3:p:168-98 is not listed on IDEAS
    2. Ilan Noy & Christopher Edmonds, 2016. "The Economic and Fiscal Burdens of Disasters in the Pacific," CESifo Working Paper Series 6237, CESifo Group Munich.
    3. Noy, Ilan, 2012. "Natural disasters and economic policy for the Pacific Rim," Working Paper Series 2088, Victoria University of Wellington, School of Economics and Finance.
    4. Eric Nazindigouba Kere & Somlanare Romuald Kinda & Rasmané Ouedraogo, 2015. "Do Natural Disasters Hurt Tax Resource Mobilization?," Working Papers halshs-01242968, HAL.
    5. Eduardo Cavallo & Ilan Noy, 2009. "The Economics of Natural Disasters: A Survey," Research Department Publications 4649, Inter-American Development Bank, Research Department.
    6. repec:rss:jnljee:v3i2p5 is not listed on IDEAS
    7. 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.
    8. 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.
    9. Bourdeau-Brien, Michael & Kryzanowski, Lawrence, 2017. "The impact of natural disasters on the stock returns and volatilities of local firms," The Quarterly Review of Economics and Finance, Elsevier, vol. 63(C), pages 259-270.
    10. Makena Coffman & Ilan Noy, 2009. "In the Eye of the Storm: Coping with Future Natural Disasters in Hawaii," Working Papers 200904, University of Hawaii at Manoa, Department of Economics.
    11. Thomas K.J. McDermott & Frank Barry & Richard S.J. Tol, 2014. "Disasters and development: natural disasters, credit constraints, and economic growth," Oxford Economic Papers, Oxford University Press, vol. 66(3), pages 750-773.
    12. Eduardo Cavallo & Ilan Noy, 2010. "The Aftermath of Natural Disasters: Beyond Destruction," CESifo Forum, Ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 11(2), pages 25-35, July.
    13. Makena Coffman & Ilan Noy, 2009. "A Hurricane’s Long-Term Economic Impact: the Case of Hawaii’s Iniki," Working Papers 200905, University of Hawaii at Manoa, Department of Economics.
    14. Klomp, Jeroen, 2017. "Flooded with debt," Journal of International Money and Finance, Elsevier, vol. 73(PA), pages 93-103.
    15. repec:eee:ecolec:v:146:y:2018:i:c:p:1-9 is not listed on IDEAS
    16. Karim, Azreen & Noy, Ilan, 2015. "The (mis) allocation of public spending in a low income country: Evidence from disaster risk reduction spending in Bangladesh," Working Paper Series 4194, Victoria University of Wellington, School of Economics and Finance.
    17. Tatyana Deryugina, 2017. "The Fiscal Cost of Hurricanes: Disaster Aid versus Social Insurance," American Economic Journal: Economic Policy, American Economic Association, vol. 9(3), pages 168-198, August.
    18. Ouattara, Bazoumana & Strobl, Eric, 2013. "The fiscal implications of hurricane strikes in the Caribbean," Ecological Economics, Elsevier, vol. 85(C), pages 105-115.
    19. Kousky, Carolyn, 2014. "Informing climate adaptation: A review of the economic costs of natural disasters," Energy Economics, Elsevier, vol. 46(C), pages 576-592.
    20. repec:jed:journl:v:42:y:2017:i:3:p:89-109 is not listed on IDEAS
    21. Thomas K.J. McDermott, "undated". "Disasters and Development: Natural Disasters, Credit Constraints and Economic Growth," The Institute for International Integration Studies Discussion Paper Series iiisdp363, IIIS.

    More about this item

    Keywords

    natural disasters; fiscal policy;

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • O23 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Fiscal and Monetary Policy in Development
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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