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Natural disasters and growth - going beyond the averages, Volume 1
 
Author:Loayza, Norman; Olaberria, Eduardo; Rigolini, Jamele; Christiaensen, Luc; Collection Title:Policy Research working paper ; no. WPS 4980
Country:World; Date Stored:2009/06/29
Document Date:2009/06/01Document Type:Policy Research Working Paper
SubTopics:Achieving Shared Growth; Disaster Management; Economic Conditions and Volatility; Hazard Risk Management; Natural DisastersLanguage:English
Region:The World RegionReport Number:WPS4980
Volume No:1  

Summary: There has been a steady increase in the occurrence of natural disasters. Yet their effect on economic growth remains unclear, with some studies reporting negative, and others indicating no, or even positive effects. These seemingly contradictory findings can be reconciled by exploring the effects of natural disasters on growth separately by disaster and economic sector. This is consistent with the insights from traditional models of economic growth, where production depends on total factor productivity, the provision of intermediate outputs, and the capital-labor ratio, as well as the existence of important intersector linkages. Applying a dynamic Generalized Method of Moments panel estimator to a 1961-2005 cross-country panel, three major insights emerge. First, disasters affect economic growth - but not always negatively, and differently across disasters and economic sectors. Second, although moderate disasters can have a positive growth effect in some sectors, severe disasters do not. Third, growth in developing countries is more sensitive to natural disasters - more sectors are affected and the magnitudes are non-trivial.

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