Natural Disasters and Growth : Going beyond the Averages

There has been a steady increase in the occurrence of natural disasters. Yet their effect on economic growth remains unclear, with some studies reporting negative, and others indicating no, or even positive effects. These seemingly contradictory fi...

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Bibliographic Details
Main Authors:	Loayza, Norman, Olaberria, Eduardo, Rigolini, Jamele, Christiaensen, Luc
Format:	Policy Research Working Paper
Language:	English
Published:	2012
Subjects:	ABUNDANCE AGGREGATE OUTPUT AGRICULTURAL GROWTH AGRICULTURAL PRODUCTION AGRICULTURAL SECTOR ANNUAL GROWTH ANNUAL GROWTH RATE BANKING CRISIS BUSINESS CYCLES CAPITAL ACCUMULATION CAPITAL INCREASES CASUALTIES CENTRE FOR RESEARCH ON THE EPIDEMIOLOGY CLIMATE CHANGE CONSUMER PRICE CONSUMER PRICE INDEX COUNTRY CASE COUNTRY REGRESSIONS COVARIANCE MATRIX CRED CROSS-COUNTRY ANALYSIS DAMAGES DATABASE ON DISASTERS DEATH TOLL DECLARATION DEPENDENT VARIABLE DESCRIPTIVE STATISTICS DEVELOPED COUNTRIES DEVELOPING COUNTRIES DEVELOPING WORLD DEVELOPMENT ECONOMICS DEVELOPMENT INDICATORS DEVELOPMENT RESEARCH DISASTER DISASTER ASSISTANCE DISASTER REDUCTION DISASTER RISK DISASTER RISK REDUCTION DISASTER TYPE DISASTER TYPES DISTRIBUTIONAL IMPACT DOMESTIC CREDIT DROUGHT DROUGHTS DYNAMIC PANEL EARTHQUAKE EARTHQUAKES ECONOMIC ACTIVITIES ECONOMIC ACTIVITY ECONOMIC DEVELOPMENT ECONOMIC GROWTH ECONOMIC IMPACT ECONOMIC STUDIES ECONOMICS ECONOMICS LETTERS EMPIRICAL LITERATURE EMPIRICAL RESULTS EMPLOYMENT EQUATIONS ERROR TERM ESTIMATION METHOD ESTIMATION RESULTS EXPLANATORY VARIABLES EXTERNAL CONDITIONS EXTERNAL SHOCKS FAMINE FINANCIAL DEPTH FINANCIAL DEVELOPMENT FINANCIAL INSTITUTIONS FISCAL POLICY FIXED EFFECTS FLOOD FLOODING FLOODS GLOBAL CONDITIONS GOVERNMENT CONSUMPTION GOVERNMENT SPENDING GROSS DOMESTIC PRODUCT GROWTH DETERMINANTS GROWTH EFFECT GROWTH EFFECTS GROWTH MODEL GROWTH PATTERN GROWTH PERFORMANCE GROWTH RATE GROWTH RATES GROWTH REGRESSION GROWTH REGRESSION EQUATION GROWTH REGRESSIONS HIGH INFLATION HOUSEHOLD DATA IMPACT OF DISASTERS INCOME INCREASE GROWTH INCREASES GROWTH INDUSTRIAL SECTOR INFLATION RATE INFRASTRUCTURE DAMAGE INFRASTRUCTURE PROVISION INSTRUMENTAL-VARIABLE INSURANCE INSURANCE COMPANIES INTERACTION TERM INTERACTION TERMS INTERNATIONAL MONETARY FUND INTERNATIONAL TRADE LAGGED DEPENDENT LAGGED LEVELS LAGGED VALUES LEVEL OF OUTPUT PER CAPITA LONG RUN LONG-RUN GROWTH MACROECONOMIC FLUCTUATIONS MACROECONOMIC POLICIES MACROECONOMIC STABILIZATION MACROECONOMIC VOLATILITY MARGINAL PRODUCT MARGINAL RETURNS MONETARY ECONOMICS NATURAL DISASTER NATURAL DISASTERS NATURAL HAZARDS NEGATIVE EFFECT NEGATIVE IMPACT NEGATIVE SIGN 0 HYPOTHESIS OUTPUT GROWTH PER CAPITA GROWTH POINT ESTIMATES POLICY RESEARCH POVERTY REDUCING POVERTY REDUCTION PRIVATE DOMESTIC PRIVATE DOMESTIC CREDIT PUBLIC INFRASTRUCTURE RECONSTRUCTION REGRESSION MODEL RELATIVE IMPORTANCE RELIEF RELIEF ACTIVITIES REVERSE CAUSATION REVIEW OF ECONOMICS RICH ECONOMIES SAVING RATE SAVINGS SERIAL CORRELATION SHARP REDUCTION SIGNIFICANT EFFECT SOCIAL PROTECTION STABILIZATION POLICIES STANDARD GROWTH DETERMINANTS STORM STORMS TRADE OPENNESS TRADE SHOCKS TRANSITIONAL CONVERGENCE TYPE OF DISASTER UNITED STATES AGENCY FOR INTERNATIONAL DEVELOPMENT
Online Access:	http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20090629153246 http://hdl.handle.net/10986/4172

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Summary:	There has been a steady increase in the occurrence of natural disasters. Yet their effect on economic growth remains unclear, with some studies reporting negative, and others indicating no, or even positive effects. These seemingly contradictory findings can be reconciled by exploring the effects of natural disasters on growth separately by disaster and economic sector. This is consistent with the insights from traditional models of economic growth, where production depends on total factor productivity, the provision of intermediate outputs, and the capital-labor ratio, as well as the existence of important intersector linkages. Applying a dynamic Generalized Method of Moments panel estimator to a 1961-2005 cross-country panel, three major insights emerge. First, disasters affect economic growth - but not always negatively, and differently across disasters and economic sectors. Second, although moderate disasters can have a positive growth effect in some sectors, severe disasters do not. Third, growth in developing countries is more sensitive to natural disasters - more sectors are affected and the magnitudes are non-trivial.

Natural Disasters and Growth : Going beyond the Averages

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