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Catastrophic Natural Disasters and Economic Growth

Eduardo Cavallo, Sebastian Galiani, Ilan Noy and Juan Pantano

Posted Online December 20, 2013
https://doi.org/10.1162/REST_a_00413

Review of Economics and Statistics

Volume 95 | Issue 5 | December 2013
p.1549-1561
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Catastrophic Natural Disasters and Economic Growth

Eduardo Cavallo, Sebastian Galiani, Ilan Noy and Juan Pantano
https://doi.org/10.1162/REST_a_00413
Received: February 09, 2011
Accepted: June 20, 2012
Published Online: December 20, 2013
Abstract

We examine the average causal impact of catastrophic natural disasters on economic growth by combining information from comparative case studies. For each country affected by a large disaster, we compute the counterfactual by constructing synthetic controls. We find that only extremely large disasters have a negative effect on output in both the short and the long runs. However, we also show that this results from two events where radical political revolutions followed the disasters. Once we control for these political changes, even extremely large disasters do not display any significant effect on economic growth.

Eduardo Cavallo
Inter-American Development Bank
Sebastian Galiani
University of Maryland
Ilan Noy
University of Hawaii and Victoria University of Wellington
Juan Pantano
Washington University in St. Louis
https://doi.org/10.1162/REST_a_00413
Abstract

We examine the average causal impact of catastrophic natural disasters on economic growth by combining information from comparative case studies. For each country affected by a large disaster, we compute the counterfactual by constructing synthetic controls. We find that only extremely large disasters have a negative effect on output in both the short and the long runs. However, we also show that this results from two events where radical political revolutions followed the disasters. Once we control for these political changes, even extremely large disasters do not display any significant effect on economic growth.

Eduardo Cavallo
Inter-American Development Bank
Sebastian Galiani
University of Maryland
Ilan Noy
University of Hawaii and Victoria University of Wellington
Juan Pantano
Washington University in St. Louis
Download Options

Catastrophic Natural Disasters and Economic Growth

Eduardo Cavallo, Sebastian Galiani, Ilan Noy and Juan Pantano
https://doi.org/10.1162/REST_a_00413
Received: February 09, 2011
Accepted: June 20, 2012
Published Online: December 20, 2013
Abstract

We examine the average causal impact of catastrophic natural disasters on economic growth by combining information from comparative case studies. For each country affected by a large disaster, we compute the counterfactual by constructing synthetic controls. We find that only extremely large disasters have a negative effect on output in both the short and the long runs. However, we also show that this results from two events where radical political revolutions followed the disasters. Once we control for these political changes, even extremely large disasters do not display any significant effect on economic growth.

Eduardo Cavallo
Inter-American Development Bank
Sebastian Galiani
University of Maryland
Ilan Noy
University of Hawaii and Victoria University of Wellington
Juan Pantano
Washington University in St. Louis
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