Do Natural Disasters Have Long-Term Effects on Growth?

44 Pages Posted: 28 Jan 2010

Date Written: November 2, 2009

Abstract

Large natural disasters (LNDs) are ubiquitous phenomena with potentially large impacts on the infrastructure and population of countries and on their economic activity in general. Using a panel of 113 countries and 36 years of data, I examine the relationship between different measures of natural disaster impact and long-run economic growth. The sample is partitioned in two separate ways: According to the amount and type of disasters that countries have experienced and to the size of those disasters. For each partition, I present two sets of econometric estimations. The first regressions identify short-run and longer-lasting effects of LNDs. However, these first estimations do not distinguish between temporary but persistent effects and truly permanent ones. I thus estimate a structural model that allows me to identify permanent changes. The results of the first regressions show that for some of the groups of countries the disaster impact persists beyond the 2-5 years in which reconstruction and adaptation are expected to have an effect on the economy. However, the estimates using the structural model show that only for a very small number of countries which share a history of highly devastating natural disasters the negative effects are truly permanent.

Keywords: Natural disasters, catastrophes, hurricanes, earthquakes, growth, panel data

JEL Classification: O11, O19, Q54

Suggested Citation

Jaramillo, Christian R., Do Natural Disasters Have Long-Term Effects on Growth? (November 2, 2009). Documento CEDE No. 2009-24, Available at SSRN: https://ssrn.com/abstract=1543453 or http://dx.doi.org/10.2139/ssrn.1543453

Christian R. Jaramillo (Contact Author)

Universidad de los Andes ( email )

Cra 1 No 18A-10
Of. 310 Ed. A
Bogotá
Colombia
(+57 1) 339 4949 x 2439 (Phone)
332 4021 (Fax)

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