Fragile prosperity: Natural disasters and economic growth in small island developing states

Giovanni Valensisi and H. Birce Akay

No #12, UNCTAD Working Papers from United Nations Conference on Trade and Development

Abstract: This study re-examines the complex link between climate-related disasters and economic growth in developing countries, with a focus on the specific vulnerabilities of Small Island Developing States (SIDS). Using system GMM estimation, the analysis reveals that SIDS experience disproportionately severe medium-term growth setbacks compared to other developing nations, even after accounting for standard growth determinants. This can be linked to sector-specific pathways of vulnerability, as storms have a relatively more pronounced impact on services growth, and floods on industrial value-added growth. For SIDS, whose economies are poorly diversified and highly dependent on volatile services exports such as tourism, economic diversification emerges as a key avenue to mitigate exposure to shocks and build endogenous resilience.

Date: 2026
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