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Natural disasters and growth - going beyond the averages

Norman Loayza (nloayza@worldbank.org), Eduardo Olaberria, Iamele Rigolini and Luc Christiaensen

No 4980, Policy Research Working Paper Series from The World Bank

Abstract: There has been a steady increase in the occurrence of natural disasters. Yet their effect on economic growth remains unclear, with some studies reporting negative, and others indicating no, or even positive effects. These seemingly contradictory findings can be reconciled by exploring the effects of natural disasters on growth separately by disaster and economic sector. This is consistent with the insights from traditional models of economic growth, where production depends on total factor productivity, the provision of intermediate outputs, and the capital-labor ratio, as well as the existence of important intersector linkages. Applying a dynamic Generalized Method of Moments panel estimator to a 1961-2005 cross-country panel, three major insights emerge. First, disasters affect economic growth - but not always negatively, and differently across disasters and economic sectors. Second, although moderate disasters can have a positive growth effect in some sectors, severe disasters do not. Third, growth in developing countries is more sensitive to natural disasters - more sectors are affected and the magnitudes are non-trivial.

Keywords: Natural Disasters; Disaster Management; Hazard Risk Management; Achieving Shared Growth; Economic Conditions and Volatility (search for similar items in EconPapers)
Date: 2009-06-01
New Economics Papers: this item is included in nep-dev and nep-fdg
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Citations: View citations in EconPapers (74)

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Journal Article: Natural Disasters and Growth: Going Beyond the Averages (2012) Downloads
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