In the Eye of the Storm: Firms and Capital Destruction in India
74 Pages Posted: 16 Sep 2019 Last revised: 21 Nov 2022
Date Written: May 20, 2022
The number and strength of climate-change-related disasters is increasing, and developing countries are bearing most of the brunt. In this paper we study how firms react to tropical cyclones in India. Using a panel of manufacturing firms between 1995 and 2006 and cyclone data from the National Oceanic and Atmospheric Administration, we find that the average cyclone destroys 2.2% of a firm's fixed assets and decreases its sales by 3.1%. The impacts of the average cyclone are temporary and disappear after one year. Focusing on the heterogeneity of these results by firm and industry quality, we also find that capital and sales reallocate toward better-performing industries. Within industry, firm quality only matters for the response of sales.
Keywords: firms, capital, storms
JEL Classification: D22, D24, Q54
Suggested Citation: Suggested Citation