The Growth Effects of Natural Disasters: Evidence From A Novel Global Dataset Over 1970-2023

We construct standardized climate anomalies from daily observations and carefully calibrate physical thresholds to identify storms, floods, droughts, heatwaves, and cold snaps across 196 countries over the period 1970–2023. Using a local projections framework, we estimate the contemporaneous and 2-year effects of each disaster type and collectively on real GDP growth. We find that storms, floods, droughts, and heatwaves significantly reduce growth on impact (by roughly 0.1–0.2 percentage points on average), with the largest effects observed in emerging markets and developing economies. Cold spells have no statistically significant impacts. Our estimations also indicate that the initial drop in GDP growth is often not fully offset by a quick rebound, leaving GDP below the pre-disaster trend in the subsequent two years. Severe disasters impose far larger costs. Catastrophic floods can lower growth by up to 3 percentage points (with once-in-100-year storms or heatwaves reducing growth by ~0.5pp and extreme droughts by ~1pp). By combining the estimated global coefficients with each country’s own disaster intensity, we translate the aggregate results into localized growth effects and cross-check them against estimates from a dynamic heterogenous panel model. Finally, rolling-window estimates indicate that the contemporaneous growth impact of storms and heatwaves has attenuated in recent decades, whereas droughts have become increasingly damaging, reflecting divergent adaptation or even maladaptation and vulnerability trends over time.