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The Impact of Natural Disasters on Economic Growth

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  • Cavallo, Eduardo A.
  • Becerra, Oscar
  • Acevedo, Laura

Abstract

This paper estimates the impact of catastrophic natural disasters on economic growth using an event study methodology on a country panel dataset from 1970 to 2019. The severity of the events is determined by the associated mortality. We find that affected economies which, given the way natural disasters are ranked, comprise mainly developing countries, suffer an average loss between 2.1 and 3.7 percentage points (p.p.). The estimated loss is not offset by above-average growth rates in the disasters aftermath. In contrast, when the severity of the events is determined by physical intensity rather than by mortality, which implies a more balanced estimating sample of developed and developing economies, the estimated effects on growth are negligible. Thus, the negative impacts of natural disasters on economic growth are larger for poorer countries, suggesting that the impact of natural disasters on growth is an economic development issue.

Suggested Citation

  • Cavallo, Eduardo A. & Becerra, Oscar & Acevedo, Laura, 2021. "The Impact of Natural Disasters on Economic Growth," IDB Publications (Working Papers) 11662, Inter-American Development Bank.
    • Handle: RePEc:idb:brikps:11662
    DOI: http://dx.doi.org/10.18235/0003683
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    Cited by:

    1. von Peter, Goetz & von Dahlen, Sebastian & Saxena, Sweta, 2024. "Unmitigated disasters? Risk sharing and macroeconomic recovery in a large international panel," Journal of International Economics, Elsevier, vol. 149(C).
    2. Takuro Ashizawa & Nao Sudo & Hiroki Yamamoto, 2022. "How Do Floods Affect the Economy? An Empirical Analysis using Japanese Flood Data," Bank of Japan Working Paper Series 22-E-6, Bank of Japan.
    3. Juan Robalino & Katrina Mullan & Matías Piaggio & Marisol Guzmán, 2023. "Does Green Infrastructure Work? Precipitation, Protected Areas, Floods and Landslides," Economics of Disasters and Climate Change, Springer, vol. 7(3), pages 457-482, November.
    4. Cavallo, Eduardo A. & Gómez, Santiago & Noy, Ilan & Strobl, Eric, 2024. "Climate Change, Hurricanes, and Sovereign Debt in the Caribbean Basin," IDB Publications (Working Papers) 13351, Inter-American Development Bank.

    More about this item

    Keywords

    Event study;

    JEL classification:

    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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