Catastrophic Natural Disasters and Economic Growth

35 Pages Posted: 29 Apr 2010 Last revised: 7 May 2013

Eduardo A. Cavallo

Inter-American Development Bank (IDB) - Research Department

Sebastian Galiani

University of Maryland - Department of Economics

Ilan Noy

Victoria University of Wellington

Juan Pantano

Washington University in St. Louis - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: December 12, 2012

Abstract

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

Cavallo, Eduardo A. and Galiani, Sebastian and Noy, Ilan and Pantano, Juan, Catastrophic Natural Disasters and Economic Growth (December 12, 2012). Available at SSRN: https://ssrn.com/abstract=1597507 or http://dx.doi.org/10.2139/ssrn.1597507

Eduardo A. Cavallo

Inter-American Development Bank (IDB) - Research Department ( email )

1300 New York Ave., NW
Washington, DC 20577
United States

Sebastian Galiani (Contact Author)

University of Maryland - Department of Economics ( email )

College Park, MD 20742
United States

Ilan Noy

Victoria University of Wellington

P.O. Box 600
Wellington, 6140
New Zealand

Juan Pantano

Washington University in St. Louis - Department of Economics ( email )

One Brookings Drive
St. Louis, MO 63130
United States

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