Catastrophic%20Natural%20Disasters%20and%20Economic%20Growth

Working Papers

Catastrophic Natural Disasters and Economic Growth


CODE: IDB-WP-183
AUTHOR(s): Cavallo, Eduardo A. , Galiani, Sebastian , Noy, Ilan , Pantano, Juan
PUBLISHED: June 2010
LANGUAGE: English
RELATED TOPICS: Macroeconomics
DOWNLOAD FILE IN: English

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.

In the Press:


Creative Destruction?
by James Surowiecki
March 28, 2011


Gauging Disaster’s Toll on an Economy
by Binyamin Appelbaum
March 15, 2011

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