Nothing Special   »   [go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/a/eee/wdevel/v40y2012i7p1317-1336.html
   My bibliography  Save this article

Natural Disasters and Growth: Going Beyond the Averages

Author

Listed:
  • Loayza, Norman V.
  • Olaberría, Eduardo
  • Rigolini, Jamele
  • Christiaensen, Luc
Abstract
Despite the tremendous human suffering caused by natural disasters, their effects on economic growth remain unclear, with some studies reporting negative, and others indicating no or even positive effects. To reconcile these seemingly contradictory findings reported in the literature, this study explores the effects of natural disasters on growth separately by disaster and economic sector. Applying a dynamic generalized method of moments panel estimator to a 1961–2005 cross-country panel dataset, three major insights emerge. First, disasters do affect economic growth but not always negatively, with effects that differ across types of disasters and economic sectors. Second, although moderate disasters (such as moderate floods) can have a positive growth effect in some sectors, severe disasters do not. Third, growth in developing countries is more sensitive to natural disasters than in developed ones, with more sectors affected and the effects larger and economically meaningful.

Suggested Citation

  • Loayza, Norman V. & Olaberría, Eduardo & Rigolini, Jamele & Christiaensen, Luc, 2012. "Natural Disasters and Growth: Going Beyond the Averages," World Development, Elsevier, vol. 40(7), pages 1317-1336.
    • Handle: RePEc:eee:wdevel:v:40:y:2012:i:7:p:1317-1336
    DOI: 10.1016/j.worlddev.2012.03.002
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0305750X12000393
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.worlddev.2012.03.002?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Harold Alderman & John Hoddinott & Bill Kinsey, 2006. "Long term consequences of early childhood malnutrition," Oxford Economic Papers, Oxford University Press, vol. 58(3), pages 450-474, July.
    2. Hallegatte, Stéphane & Dumas, Patrice, 2009. "Can natural disasters have positive consequences? Investigating the role of embodied technical change," Ecological Economics, Elsevier, vol. 68(3), pages 777-786, January.
    3. Stéphane Hallegatte & Valentin Przyluski, 2010. "The Economics of Natural Disasters," CESifo Forum, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 11(02), pages 14-24, July.
    4. Durlauf, Steven N. & Johnson, Paul A. & Temple, Jonathan R.W., 2005. "Growth Econometrics," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.),Handbook of Economic Growth, edition 1, volume 1, chapter 8, pages 555-677, Elsevier.
    5. Hallegatte, Stephane & Ghil, Michael, 2007. "Endogenous Business Cycles and the Economic Response to Exogenous Shocks," Economic Theory and Applications Working Papers 10275, Fondazione Eni Enrico Mattei (FEEM).
    6. Alonso-Borrego, Cesar & Arellano, Manuel, 1999. "Symmetrically Normalized Instrumental-Variable Estimation Using Panel Data," Journal of Business & Economic Statistics, American Statistical Association, vol. 17(1), pages 36-49, January.
    7. Hallegatte, Stephane & Hourcade, Jean-Charles & Dumas, Patrice, 2007. "Why economic dynamics matter in assessing climate change damages: Illustration on extreme events," Ecological Economics, Elsevier, vol. 62(2), pages 330-340, April.
    8. Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, vol. 68(1), pages 29-51, July.
    9. Charlotte Benson & Edward J. Clay, 2004. "Understanding the Economic and Financial Impacts of Natural Disasters," World Bank Publications - Books, The World Bank Group, number 15025.
    10. Luc J. Christiaensen & Kalanidhi Subbarao, 2005. "Towards an Understanding of Household Vulnerability in Rural Kenya," Journal of African Economies, Centre for the Study of African Economies, vol. 14(4), pages 520-558, December.
    11. Eswar S. Prasad & Raghuram G. Rajan & Arvind Subramanian, 2007. "Foreign Capital and Economic Growth," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 38(1), pages 153-230.
    12. Jesus Crespo Cuaresma, 2010. "Natural Disasters and Human Capital Accumulation," The World Bank Economic Review, World Bank, vol. 24(2), pages 280-302, July.
    13. John Y. Campbell & N. Gregory Mankiw, 1987. "Are Output Fluctuations Transitory?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 102(4), pages 857-880.
    14. Ross Levine & Norman Loayza & Thorsten Beck, 2002. "Financial Intermediation and Growth: Causality and Causes," Central Banking, Analysis, and Economic Policies Book Series, in: Leonardo Hernández & Klaus Schmidt-Hebbel & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Se (ed.),Banking, Financial Integration, and International Crises, edition 1, volume 3, chapter 2, pages 031-084, Central Bank of Chile.
    15. Loayza, Norman V. & Raddatz, Claudio, 2010. "The composition of growth matters for poverty alleviation," Journal of Development Economics, Elsevier, vol. 93(1), pages 137-151, September.
    16. Noy, Ilan, 2009. "The macroeconomic consequences of disasters," Journal of Development Economics, Elsevier, vol. 88(2), pages 221-231, March.
    17. Dercon, Stefan, 2004. "Growth and shocks: evidence from rural Ethiopia," Journal of Development Economics, Elsevier, vol. 74(2), pages 309-329, August.
    18. Christian R. Jaramillo H., 2007. "Natural disasters and growth: evidence using a wide panel of countries," Documentos CEDE 3927, Universidad de los Andes, Facultad de Economía, CEDE.
    19. Mark Skidmore & Hideki Toya, 2002. "Do Natural Disasters Promote Long-Run Growth?," Economic Inquiry, Western Economic Association International, vol. 40(4), pages 664-687, October.
    20. Robert M. Solow, 1956. "A Contribution to the Theory of Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 70(1), pages 65-94.
    21. Foster, Andrew D, 1995. "Prices, Credit Markets and Child Growth in Low-Income Rural Areas," Economic Journal, Royal Economic Society, vol. 105(430), pages 551-570, May.
    22. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 71-102, October.
    23. Raddatz, Claudio, 2007. "Are external shocks responsible for the instability of output in low-income countries?," Journal of Development Economics, Elsevier, vol. 84(1), pages 155-187, September.
    24. Andrea Leiter & Harald Oberhofer & Paul Raschky, 2009. "Creative Disasters? Flooding Effects on Capital, Labour and Productivity Within European Firms," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 43(3), pages 333-350, July.
    25. Eduardo Cavallo & Sebastian Galiani & Ilan Noy & Juan Pantano, 2013. "Catastrophic Natural Disasters and Economic Growth," The Review of Economics and Statistics, MIT Press, vol. 95(5), pages 1549-1561, December.
    26. Seema Jayachandran, 2006. "Selling Labor Low: Wage Responses to Productivity Shocks in Developing Countries," Journal of Political Economy, University of Chicago Press, vol. 114(3), pages 538-575, June.
    27. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
    28. Auffret, Philippe, 2003. "High consumption volatility : the impact of natural disasters?," Policy Research Working Paper Series 2962, The World Bank.
    29. Martin Heger & Alex Julca & Oliver Paddison, 2008. "Analysing the Impact of Natural Hazards in Small Economies: The Caribbean Case," WIDER Working Paper Series RP2008-25, World Institute for Development Economic Research (UNU-WIDER).
    30. Holtz-Eakin, Douglas & Newey, Whitney & Rosen, Harvey S, 1988. "Estimating Vector Autoregressions with Panel Data," Econometrica, Econometric Society, vol. 56(6), pages 1371-1395, November.
    31. Jesús Crespo Cuaresma & Jaroslava Hlouskova & Michael Obersteiner, 2008. "Natural Disasters As Creative Destruction? Evidence From Developing Countries," Economic Inquiry, Western Economic Association International, vol. 46(2), pages 214-226, April.
    32. Alexander W. Hoffmaister & Jorge E. Roldós & Peter Wickham, 1998. "Macroeconomic Fluctuations in Sub-Saharan Africa," IMF Staff Papers, Palgrave Macmillan, vol. 45(1), pages 132-160, March.
    33. Carter, Michael R. & Little, Peter D. & Mogues, Tewodaj & Negatu, Workneh, 2007. "Poverty Traps and Natural Disasters in Ethiopia and Honduras," World Development, Elsevier, vol. 35(5), pages 835-856, May.
    34. Griliches, Zvi & Hausman, Jerry A., 1986. "Errors in variables in panel data," Journal of Econometrics, Elsevier, vol. 31(1), pages 93-118, February.
    35. Hochrainer, Stefan, 2009. "Assessing the macroeconomic impacts of natural disasters : are there any ?," Policy Research Working Paper Series 4968, The World Bank.
    36. Adam Rose, 2004. "Economic Principles, Issues, and Research Priorities in Hazard Loss Estimation," Advances in Spatial Science, in: Yasuhide Okuyama & Stephanie E. Chang (ed.), Modeling Spatial and Economic Impacts of Disasters, chapter 2, pages 13-36, Springer.
    37. Lopez, Ramon, 2009. "Natural disasters and the dynamics of intangible assets," Policy Research Working Paper Series 4874, The World Bank.
    38. Haggblade, Steven & Hazell, Peter B. R. & Reardon, Thomas, 2009. "Transforming the rural nonfarm economy: Opportunities and threats in the developing world," Issue briefs 58, International Food Policy Research Institute (IFPRI).
    39. Matthew E. Kahn, 2005. "The Death Toll from Natural Disasters: The Role of Income, Geography, and Institutions," The Review of Economics and Statistics, MIT Press, vol. 87(2), pages 271-284, May.
    40. Luc Christiaensen & Lionel Demery, 2007. "Down to Earth : Agriculture and Poverty Reduction in Africa," World Bank Publications - Books, The World Bank Group, number 6624.
    41. Eduardo Cavallo & Sebastian Galiani & Ilan Noy & Juan Pantano, 2013. "Catastrophic Natural Disasters and Economic Growth," The Review of Economics and Statistics, MIT Press, vol. 95(5), pages 1549-1561, December.
    42. Julie Zissimopoulos & Lynn Karoly, 2010. "Employment and self-employment in the wake of Hurricane Katrina," Demography, Springer;Population Association of America (PAA), pages 345-367.
    43. John G. McPeak & Christopher B. Barrett, 2001. "Differential Risk Exposure and Stochastic Poverty Traps Among East African Pastoralists," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(3), pages 674-679.
    44. Mr. Paolo Mauro & Mr. Torbjorn I. Becker, 2006. "Output Drops and the Shocks That Matter," IMF Working Papers 2006/172, International Monetary Fund.
    45. Calderon, Cesar & Loayza, Norman & Schmidt-Hebbel, Klaus, 2005. "Does openness imply greater exposure ?," Policy Research Working Paper Series 3733, The World Bank.
    46. Lant Pritchett, 1997. "Divergence, Big Time," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 3-17, Summer.
    47. Noy, Ilan & Vu, Tam Bang, 2010. "The economics of natural disasters in a developing country: The case of Vietnam," Journal of Asian Economics, Elsevier, vol. 21(4), pages 345-354, August.
    48. Albala-Bertrand, J. M., 1993. "Political Economy of Large Natural Disasters: With Special Reference to Developing Countries," OUP Catalogue, Oxford University Press, number 9780198287650.
    49. Toya, Hideki & Skidmore, Mark, 2007. "Economic development and the impacts of natural disasters," Economics Letters, Elsevier, vol. 94(1), pages 20-25, January.
    50. David Roodman, 2009. "A Note on the Theme of Too Many Instruments," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 71(1), pages 135-158, February.
    51. Costanza, Robert & Farley, Joshua, 2007. "Ecological economics of coastal disasters: Introduction to the special issue," Ecological Economics, Elsevier, vol. 63(2-3), pages 249-253, August.
    52. Hallegatte, Stephane & Przyluski, Valentin, 2010. "The economics of natural disasters : concepts and methods," Policy Research Working Paper Series 5507, The World Bank.
    53. Christiaensen, Luc & Demery, Lionel & Kuhl, Jesper, 2011. "The (evolving) role of agriculture in poverty reduction--An empirical perspective," Journal of Development Economics, Elsevier, vol. 96(2), pages 239-254, November.
    54. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(2), pages 277-297.
    55. Mr. Tobias N. Rasmussen, 2004. "Macroeconomic Implications of Natural Disasters in the Caribbean," IMF Working Papers 2004/224, International Monetary Fund.
    56. World Bank, 2007. "World Development Indicators 2007," World Bank Publications - Books, The World Bank Group, number 8150.
    57. David Dollar & Aart Kraay, 2004. "Trade, Growth, and Poverty," Economic Journal, Royal Economic Society, vol. 114(493), pages 22-49, February.
    58. Costas Azariadis & Allan Drazen, 1990. "Threshold Externalities in Economic Development," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 105(2), pages 501-526.
    59. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Felbermayr, Gabriel & Gröschl, Jasmin, 2014. "Naturally negative: The growth effects of natural disasters," Journal of Development Economics, Elsevier, vol. 111(C), pages 92-106.
    2. Thomas K.J. McDermott & Frank Barry & Richard S.J. Tol, 2014. "Disasters and development: natural disasters, credit constraints, and economic growth," Oxford Economic Papers, Oxford University Press, vol. 66(3), pages 750-773.
    3. Eduardo Cavallo & Ilan Noy, 2009. "The Economics of Natural Disasters - A Survey," Working Papers 200919, University of Hawaii at Manoa, Department of Economics.
    4. Johanna Choumert-Nkolo & Anaïs Lamour & Pascale Phélinas, 2021. "The Economics of Volcanoes," Economics of Disasters and Climate Change, Springer, vol. 5(2), pages 277-299, July.
    5. Vikrant Panwar & Subir Sen, 2019. "Economic Impact of Natural Disasters: An Empirical Re-examination," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 13(1), pages 109-139, February.
    6. Lazzaroni, Sara & van Bergeijk, Peter A.G., 2014. "Natural disasters' impact, factors of resilience and development: A meta-analysis of the macroeconomic literature," Ecological Economics, Elsevier, vol. 107(C), pages 333-346.
    7. Wenzel, Lars & Wolf, André, 2013. "Protection against major catastrophes: An economic perspective," HWWI Research Papers 137, Hamburg Institute of International Economics (HWWI).
    8. F. Zhou & W.J.W. Botzen, 2017. "The Impact of Natural Disasters on Firm Growth in Vietnam:: Interaction with Financial Constraints," Working Papers 17-20, Utrecht School of Economics.
    9. Kousky, Carolyn, 2012. "Informing Climate Adaptation: A Review of the Economic Costs of Natural Disasters, Their Determinants, and Risk Reduction Options," RFF Working Paper Series dp-12-28, Resources for the Future.
    10. Matthew A. COLE & Robert J R ELLIOTT & OKUBO Toshihiro & Eric STROBL, 2013. "Natural Disasters and Plant Survival: The impact of the Kobe earthquake," Discussion papers 13063, Research Institute of Economy, Trade and Industry (RIETI).
    11. Matthew A. COLE & Robert J R ELLIOTT & OKUBO Toshihiro & Eric STROBL, 2015. "Natural Disasters, Industrial Clusters and Manufacturing Plant Survival," Discussion papers 15008, Research Institute of Economy, Trade and Industry (RIETI).
    12. Kousky, Carolyn, 2014. "Informing climate adaptation: A review of the economic costs of natural disasters," Energy Economics, Elsevier, vol. 46(C), pages 576-592.
    13. Fujin Zhou & Wouter Botzen, 2021. "Firm Level Evidence of Disaster Impacts on Growth in Vietnam," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 79(2), pages 277-322, June.
    14. I. Koetsier, 2017. "The fiscal impact of natural disasters," Working Papers 17-17, Utrecht School of Economics.
    15. Gignoux, Jérémie & Menéndez, Marta, 2016. "Benefit in the wake of disaster: Long-run effects of earthquakes on welfare in rural Indonesia," Journal of Development Economics, Elsevier, vol. 118(C), pages 26-44.
    16. Noy, Ilan & Vu, Tam Bang, 2010. "The economics of natural disasters in a developing country: The case of Vietnam," Journal of Asian Economics, Elsevier, vol. 21(4), pages 345-354, August.
    17. Diego D'iaz & Pablo Paniagua & Cristi'an Larroulet, 2024. "Earthquakes and the wealth of nations: The cases of Chile and New Zealand," Papers 2405.12041, arXiv.org.
    18. Dieppe,Alistair Matthew & Kilic Celik,Sinem & Okou,Cedric Iltis Finafa, 2020. "Implications of Major Adverse Events on Productivity," Policy Research Working Paper Series 9411, The World Bank.
    19. Ruohan Wu, 2023. "Natural disasters, climate change, and structural transformation: A new perspective from international trade," The World Economy, Wiley Blackwell, vol. 46(5), pages 1333-1377, May.
    20. Hallegatte,Stephane & Bangalore,Mook & Jouanjean,Marie Agnes, 2016. "Higher losses and slower development in the absence of disaster risk management investments," Policy Research Working Paper Series 7632, The World Bank.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:wdevel:v:40:y:2012:i:7:p:1317-1336. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/worlddev .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.