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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

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