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Catastrophic Natural Disasters and Economic Growth

Author

Listed:
  • Eduardo Cavallo

    () (Inter-American Development Bank, Research Department)

  • Sebastian Galiani

    () (Washington University in St. Louis)

  • Ilan Noy

    () (University of Hawaii, Department of Economics)

  • Juan Pantano

    () (Washington University in St. Louis)

Abstract

We examine the short and long run average causal impact of catastrophic natural disasters on economic growth by combining information from comparative case studies. We assess the counterfactual of the cases studied by constructing synthetic control groups taking advantage of the fact that the timing of large sudden natural disasters is an exogenous event. We find that only extremely large disasters have a negative effect on output both in the short and long run. However, we also show that this result from two events where radical political revolutions followed the natural disasters. Once we control for these political changes, even extremely large disasters do not display any significant effect on economic growth. We also find that smaller, but still very large natural disasters, have no discernible effect on output in the short run or in the long run.

Suggested Citation

  • Eduardo Cavallo & Sebastian Galiani & Ilan Noy & Juan Pantano, 2010. "Catastrophic Natural Disasters and Economic Growth," Working Papers 201006, University of Hawaii at Manoa, Department of Economics.
    • Handle: RePEc:hai:wpaper:201006
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    References listed on IDEAS

    as
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    Keywords

    Natural Disasters; Political Change; Economic Growth and Causal Effects.;

    JEL classification:

    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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