In the Eye of the Storm: Firms and Capital Destruction in India

67 Pages Posted: 16 Sep 2019 Last revised: 11 Feb 2021

See all articles by Martino Pelli

Martino Pelli

Université de Sherbrooke; University of Montreal - Center for Interuniversity Research in Econometrics; Center for Interuniversity Research and Analysis on Organization (CIRANO)

Jeanne Tschopp

University of Bern - Department of Economics

Natalia Bezmaternykh

Ryerson University, Faculty of Arts - Department of Economics

Kodjovi Eklou

International Monetary Fund (IMF)

Multiple version iconThere are 2 versions of this paper

Date Written: June 20, 2020

Abstract

This paper examines the response of firms to the destruction of their capital stock. We rely on a measure of firm exposure to tropical storms as a negative exogenous shock. Using a panel of Indian manufacturing firms between 1995 and 2006, we establish that storms destroy up to 75.3% of the fixed assets of a firm. We quantify the response of firm sales within and across industries. Within industries, the sales of less productive firms decrease disproportionately more, while across industries capital destruction leads to a shift in sales towards industries that perform better. This build-back better effect takes place mainly at the intensive margin and is driven by firms shifting their industrial production mix.

Keywords: firms, capital, storms

JEL Classification: D22, D24, Q54

Suggested Citation

Pelli, Martino and Tschopp, Jeanne and Bezmaternykh, Natalia and Eklou, Kodjovi, In the Eye of the Storm: Firms and Capital Destruction in India (June 20, 2020). Available at SSRN: https://ssrn.com/abstract=3449708 or http://dx.doi.org/10.2139/ssrn.3449708

Martino Pelli (Contact Author)

Université de Sherbrooke ( email )

2500, Blvd de l'Université
Sherbrooke, Quebec J1K 2R1
Canada

HOME PAGE: http://sites.google.com/site/martinopelli

University of Montreal - Center for Interuniversity Research in Econometrics ( email )

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Montreal, Quebec H3C 3J7
Canada

Center for Interuniversity Research and Analysis on Organization (CIRANO) ( email )

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Montreal H3C 3J7, Quebec
Canada

Jeanne Tschopp

University of Bern - Department of Economics ( email )

Schanzeneckstrasse 1
Bern, CH-3001
Switzerland

Natalia Bezmaternykh

Ryerson University, Faculty of Arts - Department of Economics ( email )

Canada

Kodjovi Eklou

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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