Unmitigated disasters? Risk sharing and macroeconomic recovery in a large international panel

Goetz von Peter (), Sebastian von Dahlen and Sweta Saxena

Journal of International Economics, 2024, vol. 149, issue C

Abstract: This paper examines the patterns of macroeconomic recovery following natural disasters. In a panel with global coverage from 1960 to 2011, we make use of insurer-assessed losses to estimate growth responses conditional on risk transfer. We find that major disasters reduce growth by 1 to 2 percentage points on impact, and over time produce an output cost of 2% to 4% of GDP, on top of the initial damage to property and infrastructure. Akin to wars and financial crises, natural disasters have permanent effects, in the sense that output losses are not fully recovered over time. But it is the uninsured losses that drive the macroeconomic cost; insured losses are less consequential in the aggregate, and can even stimulate growth. By helping to finance the recovery, insurance mitigates the macroeconomic cost of disasters. Many countries lack the capacity to (re)insure themselves and would stand to benefit from more international risk sharing.

Keywords: Natural disasters; Growth; Recovery; Risk transfer; Reinsurance; Development (search for similar items in EconPapers)
JEL-codes: G22 O11 O44 Q54 (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (1)

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Working Paper: Unmitigated disasters? Risk-sharing and macroeconomic recovery in a large international panel (2024)
Chapter: Unmitigated Disasters? Risk Sharing and Macroeconomic Recovery in a Large International Panel (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:149:y:2024:i:c:s0022199624000448

DOI: 10.1016/j.jinteco.2024.103920

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