Catastrophic Natural Disasters and Economic Growth

30 Pages Posted: 21 Apr 2011

See all articles by Eduardo A. Cavallo

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: June 2010

Abstract

This paper examines the short and long-run average causal impact of catastrophic natural disasters on economic growth by combining information from comparative case studies. The counterfactual of the cases studied is assessed by constructing synthetic control groups, taking advantage of the fact that the timing of large sudden natural disasters is an exogenous event. It is found that only extremely large disasters have a negative effect on output, both in the short and long run. However, this result appears in two events where radical political revolutions followed the natural disasters. Once these political changes are controlled for, even extremely large disasters do not display any significant effect on economic growth. It is also found that smaller, but still very large natural disasters, have no discernible effect on output.

Suggested Citation

Cavallo, Eduardo A. and Galiani, Sebastian and Noy, Ilan and Pantano, Juan, Catastrophic Natural Disasters and Economic Growth (June 2010). IDB Working Paper No. 58, Available at SSRN: https://ssrn.com/abstract=1817292 or http://dx.doi.org/10.2139/ssrn.1817292

Eduardo A. Cavallo (Contact Author)

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

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

Sebastian Galiani

University of Maryland - Department of Economics ( email )

College Park, MD 20742
United States

Ilan Noy

Victoria University of Wellington ( email )

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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