Natural Disasters and Growth - Going Beyond the Averages

42 Pages Posted: 20 Apr 2016

See all articles by Norman Loayza

Norman Loayza

World Bank - Research Department

Eduardo Olaberria

Organization for Economic Co-Operation and Development (OECD) - Economics Department (ECO); University of Maryland - College Park

Jamele Rigolini

New York University (NYU) - Department of Economics

Luc Christiaensen

World Bank

Date Written: June 1, 2009

Abstract

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.

Keywords: Natural Disasters, Disaster Management, Hazard Risk Management, Achieving Shared Growth, Economic Conditions and Volatility

Suggested Citation

Loayza, Norman and Olaberria, Eduardo A. and Rigolini, Jamele and Christiaensen, Luc, Natural Disasters and Growth - Going Beyond the Averages (June 1, 2009). World Bank Policy Research Working Paper Series, Vol. , pp. -, 2009. Available at SSRN: https://ssrn.com/abstract=1428627

Norman Loayza (Contact Author)

World Bank - Research Department ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

Eduardo A. Olaberria

Organization for Economic Co-Operation and Development (OECD) - Economics Department (ECO) ( email )

2 rue Andre Pascal
Paris Cedex 16, MO 63108
France

University of Maryland - College Park ( email )

College Park, MD 20742
United States

Jamele Rigolini

New York University (NYU) - Department of Economics ( email )

269 Mercer Street, 7th Floor
New York, NY 10011
United States

Luc Christiaensen

World Bank ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

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