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A theory of disasters and long-run growth

Hiroaki Sakamoto and Ken-Ichi Akao

Discussion papers from Graduate School of Economics , Kyoto University

Abstract: This paper develops a general framework that can be used to analyze the longterm relationship between disasters and economic growth. We first establish the basic existence and equivalence results. We then apply the framework to an endogenous growth model to consider the influence of disasters on the long-term equilibrium and the transition phase. The result shows that while experiencing disasters may lower the average growth rate of the affected countries, there exist various channels through which the risk of disasters and long-term economic performance are positively correlated. This finding reconciles the apparently contradictory evidence in recent empirical studies. Our result also suggests that care should be taken with the interpretation of disaster-driven economic growth because many of the channels identified are accompanied by a welfare decline.

Keywords: disasters; dynamic optimization; long-term growth; endogenous growth; aggregate uncertainty (search for similar items in EconPapers)
JEL-codes: O41 O44 C61 (search for similar items in EconPapers)
Pages: 40
New Economics Papers: this item is included in nep-gro and nep-mac
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Journal Article: A theory of disasters and long-run growth (2018) Downloads
Working Paper: A Theory of Disasters and Long-run Growth (2013) Downloads
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