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Innovation as Adaptation to Natural Disasters

Hongxiu Li ()

No 1709, Working Papers from University of Waterloo, Department of Economics

Abstract: Can innovation be motivated by past natural disasters? Despite some recent research, the determinants of disaster-mitigating innovation are not well understood. Starting from a conceptual model combining perceived risk theory with the profit motive, this paper investigates the salience of innovation induced by natural disasters, using a unique dataset that includes U.S.patent data, and food, drought, and earthquake damage data for the years 1977 to 2005. To address the potential endogeneity of disaster damage, I employ the control function approach with instrumental variables constructed from disaster intensity measurements. The results show that impact-reducing innovations at the state level respond to national disaster damage in the U.S. In general, the impact of natural disasters is not localized to a state-that is, disaster damage in a state also stimulates innovations in more-distant states.The fndings in this paper highlight a policy role for the federal government in channelling and more effectively spurring impact-reducing innovations nationwide.

JEL-codes: O31 Q54 Q55 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-env and nep-ino
Date: 2017-11, Revised 2017-11
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