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Natural natural disasters and economic disruption

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Listed author(s):
  • Yanos Zylberberg

    (PSE - Paris-Jourdan Sciences Economiques - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics)

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    Abstract

    The cost of natural calamities is not limited to direct capital losses. Economies in the wake of severe shocks experience important slowdowns. I construct an exhaustive dataset of objective measures on cyclones and earthquakes worldwide between 1980 and 2006 and complement existing reports on direct damages. I then estimate the amplitude of indirect economic losses in the aftermath of catastrophes. Declared damages accounting for 1% of GDP are associated with a slowdown of .05 to .06 points of GDP growth. The economic slack piles up to .4 points of GDP when I instrument by actual exposure to alleviate censorship issues and declaration biases. This output loss is superior to what would suggest a model of labor frictions and capital losses and points to large business disruptions. Finally, the objective measures happen to be better at predicting the economic slack than estimations from officials.

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    File URL: https://halshs.archives-ouvertes.fr/halshs-00564946v2/document
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    Paper provided by HAL in its series PSE Working Papers with number halshs-00564946.

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    Date of creation: Oct 2010
    Handle: RePEc:hal:psewpa:halshs-00564946
    Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00564946v2
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    Keywords: natural disasters; economic disruption; declaration biases;

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    1. Noy, Ilan, 2009. "The macroeconomic consequences of disasters," Journal of Development Economics, Elsevier, vol. 88(2), pages 221-231, March.
    2. 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.
    3. Albala-Bertrand, J. M., 1993. "Natural disaster situations and growth: A macroeconomic model for sudden disaster impacts," World Development, Elsevier, vol. 21(9), pages 1417-1434, September.
    4. Toya, Hideki & Skidmore, Mark, 2007. "Economic development and the impacts of natural disasters," Economics Letters, Elsevier, vol. 94(1), pages 20-25, January.
    5. Tobias N. Rasmussen, 2004. "Macroeconomic Implications of Natural Disasters in the Caribbean," IMF Working Papers 04/224, International Monetary Fund.
    6. 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.
    7. Strobl, Eric, 2012. "The economic growth impact of natural disasters in developing countries: Evidence from hurricane strikes in the Central American and Caribbean regions," Journal of Development Economics, Elsevier, vol. 97(1), pages 130-141.
    8. 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.
    9. HwaJung Choi, 2007. "Are Remittances Insurance? Evidence from Rainfall Shocks in the Philippines," World Bank Economic Review, World Bank Group, vol. 21(2), pages 219-248, May.
    10. Gassebner, Martin & Keck, Alexander & Teh, Robert, 2006. "The impact of disasters on international trade," WTO Staff Working Papers ERSD-2006-04, World Trade Organization (WTO), Economic Research and Statistics Division.
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    Cited by:

    1. Matthew Ranson & Lisa Tarquinio & Audrey Lew, 2016. "Modeling the Impact of Climate Change on Extreme Weather Losses," NCEE Working Paper Series 201602, National Center for Environmental Economics, U.S. Environmental Protection Agency, revised May 2016.
    2. Lazzaroni, Sara & van Bergeijk, Peter A.G., 2014. "Natural disasters' impact, factors of resilience and development: A meta-analysis of the macroeconomic literature," Ecological Economics, Elsevier, vol. 107(C), pages 333-346.
    3. Works, Richard Floyd, 2016. "Econometric modeling of exchange rate determinants by market classification: An empirical analysis of Japan and South Korea using the sticky-price monetary theory," MPRA Paper 76382, University Library of Munich, Germany.
    4. Rayenda Brahmana & Chin hong Puah & Michael Chai, 2016. "Natural Disaster and Local Bank Non-Performing Loan: Case of Nias Tsunami 2004," Economics Bulletin, AccessEcon, vol. 36(4), pages 2413-2421.

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