Unmitigated Disasters? New Evidence on the Macroeconomic Cost of Natural Catastrophes
38 Pages Posted: 5 Jan 2013
Date Written: December 1, 2012
This paper presents a large panel study on the macroeconomic consequences of natural catastrophes and analyses the extent to which risk transfer to insurance markets facilitates economic recovery. Our main results are that major natural catastrophes have large and significant negative effects on economic activity, both on impact and over the longer run. However, it is mainly the uninsured losses that drive the subsequent macroeconomic cost, whereas sufficiently insured events are inconsequential in terms of foregone output. This result helps to disentangle conflicting findings in the literature, and puts the focus on risk transfer mechanisms to help mitigate the macroeconomic costs of natural catastrophes.
Keywords: Natural catastrophes, disasters, economic growth, insurance, risk transfer, reinsurance, recovery, development
JEL Classification: G22, O11, O44, Q54
Suggested Citation: Suggested Citation