Catastrophic Natural Disasters and Economic Growth
35 Pages Posted: 29 Apr 2010 Last revised: 7 May 2013
Date Written: December 12, 2012
We examine the short and long run average causal impact of catastrophic natural disasters on economic growth by combining information from comparative case studies. We assess the counterfactual of the cases studied by constructing synthetic control groups taking advantage of the fact that the timing of large sudden natural disasters is an exogenous event. We find that only extremely large disasters have a negative effect on output both in the short and long run. However, we also show that this result from two events where radical political revolutions followed the natural disasters. Once we control for these political changes, even extremely large disasters do not display any significant effect on economic growth. We also find that smaller, but still very large natural disasters, have no discernible effect on output in the short run or in the long run.
Keywords: Natural Disasters, Political Change, Economic Growth and Causal Effects
JEL Classification: O40, O47
Suggested Citation: Suggested Citation