 Macroeconomic outcomes in disaster-prone countriesAlessandro Cantelmo, Giovanni Melina and Chris Papageorgiou () Journal of Development Economics, 2023, vol. 161, issue C Abstract: Using a dynamic stochastic general equilibrium model, we study the channels through which natural disaster shocks affect macroeconomic outcomes and welfare in disaster-prone countries. We solve the model using Taylor projection, a solution method that is shown to deal effectively with high-impact weather shocks calibrated in accordance to empirical evidence. We find large and persistent effects of weather shocks that significantly impact the income convergence path of disaster-prone countries. Relative to non-disaster-prone countries, on average, these shocks cause a welfare loss equivalent to a permanent fall in consumption of 5.3 percent. Welfare gains to countries that self-finance investments in resilient public infrastructure are found to be small, and international aid has to be sizable to achieve significant welfare gains. In addition, it is more cost-effective for donors to contribute to the financing of resilience before the realization of disasters, rather than disbursing aid after their realization. Keywords: Natural disasters; Climate change; DSGE; Resilient capital; International aid (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:deveco:v:161:y:2023:i:c:s0304387822001791 DOI: 10.1016/j.jdeveco.2022.103037 Access Statistics for this article Journal of Development Economics is currently edited by M. R. Rosenzweig More articles in Journal of Development Economics from Elsevier |
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