Tropical Cyclones and Economic Growth: the Importance of Considering Small Island Developing States

A number of empirical studies have explored the short and long-run economic relationship between tropical cyclones and national growth rates, but no general conclusion can be drawn from them so far. While negative effects are found in samples of exposed countries worldwide, cyclone shocks also show no significant influence in other national-level analyses. Using cross-country panel datasets for 83 affected nations between 1970 and 2015, this paper further investigates this issue by distinguishing a sub-group of nations which is particularly exposed to cyclonic risk and characterized by structural factors of economic vulnerability: Small Island Developing States (SIDS). To capture tropical cyclones? overall impact on economic activity, a set of exogenous climatic indicators is built by combining physical intensity data with information on exposed areas. A negative and persistent impact is found for the sub-group of SIDS, while no effect is observed for other countries irrespective of their level of development. On impact, an additional km/h of intensity over a SIDS reduces per capita GDP growth by 0.016 percentage points, and this negative effect accumulates to ? 0.024 percentage points 15 years later. In contrast, more local approaches are suggested for non SIDS. The estimated negative impact on SIDS appears to be driven by an increased dependence on foreign economic conditions, insufficient reconstruction capacities and difficulties to implement adaptation policies.