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The Economics of Natural Disasters in a Developing Country: The Case of Vietnam

  • Ilan Noy

    ()

    (Department of Economics, University of Hawaii at Manoa)

  • Tam Bang Vu

    ()

    (College of Business and Economics, University of Hawaii at Hilo)

Registered author(s):

We examine impact of natural disasters on annual output and output growth in Vietnam. Using provincial data for primary and secondary industries in Vietnam, we employ the Blundell-Bond System GMM procedure to estimate the impact of disasters on the macro-economy. Results show that more lethal disasters result in lower output growth but that more costly disasters (in terms of destroyed capital) actually appear to boost the economy in the short-run. This result is consistent with the ‘creative destruction’ hypothesis that we outline. However we find that disasters have different macroeconomic impact in different geographical regions; and these differences are potentially related to the ability to generate transfers from the central government.

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File URL: http://www.economics.hawaii.edu/research/workingpapers/WP_09-3.pdf
File Function: First version, 2009
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Paper provided by University of Hawaii at Manoa, Department of Economics in its series Working Papers with number 200903.

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Length: 28 pages
Date of creation: 01 May 2009
Date of revision:
Handle: RePEc:hai:wpaper:200903
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  1. Ilan Noy & Aekkanush Nualsri, 2007. "What do Exogenous Shocks Tell Us about Growth Theories?," Working Papers 200728, University of Hawaii at Manoa, Department of Economics.
  2. Nejat Anbarci & Monica Escaleras & Charles A. Register, 2004. "Earthquake fatalities: the interaction of nature and political economy," Working Papers 0415, Florida International University, Department of Economics.
  3. Noy, Ilan & Nualsri, Aekkanush, 2011. "Fiscal storms: public spending and revenues in the aftermath of natural disasters," Environment and Development Economics, Cambridge University Press, vol. 16(01), pages 113-128, February.
  4. Tam Bang Vu, 2008. "Foreign direct investment and endogenous growth in Vietnam," Applied Economics, Taylor & Francis Journals, vol. 40(9), pages 1165-1173.
  5. 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.
  6. Eduardo A. Cavallo & Eduardo Borensztein & Patricio Valenzuela, 2008. "Debt Sustainability Under Catastrophic Risk; The Case for Government Budget Insurance," IMF Working Papers 08/44, International Monetary Fund.
  7. P. K. Narayan, 2003. "Macroeconomic impact of natural disasters on a small island economy: evidence from a CGE model," Applied Economics Letters, Taylor & Francis Journals, vol. 10(11), pages 721-723.
  8. Faruk Selcuk & Erinc Yeldan, 2000. "On The Macroeconomic Impact Of The August, 1999 Earthquake In Turkey: A First Assessment," Working Papers 2001, Economic Research Forum, revised Jan 2000.
  9. Ramcharan, Rodney, 2007. "Does the exchange rate regime matter for real shocks? Evidence from windstorms and earthquakes," Journal of International Economics, Elsevier, vol. 73(1), pages 31-47, September.
  10. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
  11. Tobias N. Rasmussen, 2004. "Macroeconomic Implications of Natural Disasters in the Caribbean," IMF Working Papers 04/224, International Monetary Fund.
  12. 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.
  13. Toya, Hideki & Skidmore, Mark, 2007. "Economic development and the impacts of natural disasters," Economics Letters, Elsevier, vol. 94(1), pages 20-25, January.
  14. 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.
  15. Halliday, Timothy, 2006. "Migration, Risk, and Liquidity Constraints in El Salvador," Economic Development and Cultural Change, University of Chicago Press, vol. 54(4), pages 893-925, July.
  16. 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.
  17. Noy, Ilan, 2009. "The macroeconomic consequences of disasters," Journal of Development Economics, Elsevier, vol. 88(2), pages 221-231, March.
  18. Charlotte Benson & Edward J. Clay, 2004. "Understanding the Economic and Financial Impacts of Natural Disasters," World Bank Publications, The World Bank, number 15025.
  19. 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.
  20. Paxson, Christina H, 1992. "Using Weather Variability to Estimate the Response of Savings to Transitory Income in Thailand," American Economic Review, American Economic Association, vol. 82(1), pages 15-33, March.
  21. 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.
  22. Horwich, George, 2000. "Economic Lessons of the Kobe Earthquake," Economic Development and Cultural Change, University of Chicago Press, vol. 48(3), pages 521-42, April.
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