Innovation as Adaptation to Natural Disasters
Hongxiu Li ()
No 1709, Working Papers from University of Waterloo, Department of Economics
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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