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A theory of disasters and long-run growth

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  • Hiroaki Sakamoto
  • Ken-Ichi Akao

Abstract

This paper develops a general framework that can be used to analyze the longterm relationship between disasters and economic growth. We first establish the basic existence and equivalence results. We then apply the framework to an endogenous growth model to consider the influence of disasters on the long-term equilibrium and the transition phase. The result shows that while experiencing disasters may lower the average growth rate of the affected countries, there exist various channels through which the risk of disasters and long-term economic performance are positively correlated. This finding reconciles the apparently contradictory evidence in recent empirical studies. Our result also suggests that care should be taken with the interpretation of disaster-driven economic growth because many of the channels identified are accompanied by a welfare decline.

Suggested Citation

  • Hiroaki Sakamoto & Ken-Ichi Akao, "undated". "A theory of disasters and long-run growth," Discussion papers e-17-014, Graduate School of Economics , Kyoto University.
  • Handle: RePEc:kue:epaper:e-17-014
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    Cited by:

    1. Emmanuelle Augeraud-Véron & Giorgio Fabbri & Katheline Schubert, 2020. "Prevention and Mitigation of Epidemics: Biodiversity Conservation and Confinement Policies," CESifo Working Paper Series 8506, CESifo.
    2. Can Askan Mavi, 2019. "Can harmful events be another source of environmental traps?," CEE-M Working Papers halshs-02141789, CEE-M, Universtiy of Montpellier, CNRS, INRA, Montpellier SupAgro.
    3. Mavi, Can Askan, 2020. "Can harmful events be another source of environmental traps?," Journal of Mathematical Economics, Elsevier, vol. 89(C), pages 29-46.
    4. Thomas Douenne, 2020. "Disaster Risks, Disaster Strikes, and Economic Growth: the Role of Preferences," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 38, pages 251-272, October.
    5. Can Askan Mavi, 2019. "Can harmful events be another source of environmental traps?," Working Papers halshs-02141789, HAL.

    More about this item

    Keywords

    disasters; dynamic optimization; long-term growth; endogenous growth; aggregate uncertainty;

    JEL classification:

    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • O44 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Environment and Growth
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis

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