The Growth Aftermath of Natural Disasters
This paper provides a description of the macroeconomic aftermath of natural disasters. It traces the yearly response of gross domestic product growth - both aggregated and disaggregated into its agricultural and non-agricultural components - to fou...
| Main Authors: | , , |
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| Format: | Policy Research Working Paper |
| Language: | English |
| Published: |
2012
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| Subjects: | |
| 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_20090717145342 http://hdl.handle.net/10986/4193 |
| Summary: | This paper provides a description of the
macroeconomic aftermath of natural disasters. It traces the
yearly response of gross domestic product growth - both
aggregated and disaggregated into its agricultural and
non-agricultural components - to four types of natural
disasters - droughts, floods, earthquakes, and storms. The
paper uses a methodological approach based on pooling the
experiences of various countries over time. It consists of
vector auto-regressions in the presence of endogenous
variables and exogenous shocks (VARX), applied to a panel of
cross-country and time-series data. The analysis finds
heterogeneous effects on a variety of dimensions. First, the
effects of natural disasters are stronger, for better or
worse, on developing than on rich countries. Second, while
the impact of some natural disasters can be beneficial when
they are of moderate intensity, severe disasters never have
positive effects. Third, not all natural disasters are alike
in terms of the growth response they induce, and, perhaps
surprisingly, some can entail benefits regarding economic
growth. Thus, droughts have a negative effect on both
agricultural and non-agricultural growth. In contrast,
floods tend to have a positive effect on economic growth in
both major sectors. Earthquakes have a negative effect on
agricultural growth but a positive one on non-agricultural
growth. Storms tend to have a negative effect on gross
domestic product growth but the effect is short-lived and
small. Future research should concentrate on exploring the
mechanisms behind these heterogeneous impacts. |
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