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Catastrophic Natural Disasters and Economic Growth

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Listed author(s):
  • Eduardo Cavallo

    ()

  • Sebastian Galiani
  • Ilan Noy
  • Juan Pantano

Abstract

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

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Paper provided by Inter-American Development Bank, Research Department in its series Research Department Publications with number 4671.

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Date of creation: Jun 2010
Handle: RePEc:idb:wpaper:4671
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Keywords: Natural Disasters; Political Change; Economic Growth and Causal Effects;

Other versions of this item:

Find related papers by 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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  1. Yang Dean, 2008. "Coping with Disaster: The Impact of Hurricanes on International Financial Flows, 1970-2002," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 8(1), pages 1-45, June.
  2. Noy, Ilan, 2009. "The macroeconomic consequences of disasters," Journal of Development Economics, Elsevier, vol. 88(2), pages 221-231, March.
  3. N. Gregory Mankiw & David Romer & David N. Weil, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 107(2), pages 407-437.
  4. Eduardo Cavallo & Ilan Noy, 2009. "The Economics of Natural Disasters: A Survey," Research Department Publications 4649, Inter-American Development Bank, Research Department.
  5. Robert J. Barro, 2009. "Rare Disasters, Asset Prices, and Welfare Costs," American Economic Review, American Economic Association, vol. 99(1), pages 243-264, March.
  6. Robert J. Barro, 2006. "Rare Disasters and Asset Markets in the Twentieth Century," The Quarterly Journal of Economics, Oxford University Press, vol. 121(3), pages 823-866.
  7. Caballero, Ricardo J & Hammour, Mohamad L, 1994. "The Cleansing Effect of Recessions," American Economic Review, American Economic Association, vol. 84(5), pages 1350-1368, December.
  8. 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.
  9. 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.
  10. Eduardo Cavallo & Ilan Noy, 2009. "The Economics of Natural Disasters: A Survey," Research Department Publications 4649, Inter-American Development Bank, Research Department.
  11. Abadie, Alberto & Diamond, Alexis & Hainmueller, Jens, 2010. "Synthetic Control Methods for Comparative Case Studies: Estimating the Effect of California’s Tobacco Control Program," Journal of the American Statistical Association, American Statistical Association, vol. 105(490), pages 493-505.
  12. Acemoglu, Daron & Johnson, Simon & Robinson, James A., 2005. "Institutions as a Fundamental Cause of Long-Run Growth," Handbook of Economic Growth,in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 6, pages 385-472 Elsevier.
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  1. Fixed growth
    by chris dillow in Stumbling and Mumbling on 2011-03-16 12:45:56
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