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The Macroeconomic and Welfare Benefits of Building Resilience in Disaster-Prone Developing Countries

Author

Listed:
  • Mr. Yehenew Endegnanew
  • Rafael D Goncalves
  • Samuel Mann
  • Ms. Marina Mendes Tavares
  • Harold Zavarce

Abstract

Natural disasters often have high economic costs, setting back years of investment in developing countries. This paper develops a multi-sector DSGE model to study the macroeconomic and welfare implications of financing resilience-building using different fiscal instruments. The model includes developing countries’ macroeconomic and distributional features, such as a large unproductive rural sector, an incomplete credit market, and an informal sector. The results indicate that investing in resilience capital in a disaster-prone country improves welfare despite its high economic cost, but the financial instrument used to mobilize revenue matters.

Suggested Citation

  • Mr. Yehenew Endegnanew & Rafael D Goncalves & Samuel Mann & Ms. Marina Mendes Tavares & Harold Zavarce, 2025. "The Macroeconomic and Welfare Benefits of Building Resilience in Disaster-Prone Developing Countries," IMF Working Papers 2025/013, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2025/013
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