Natural Disasters and Macroeconomic Performance: An Empirical Analysis Based on an Econometric Modelling Approach

Abstract

We investigate the short and medium term (up to 5 years) macroeconomic consequences due to natural disaster events. The focus is on the Gross Domestic Product (GDP) as the main economic performance measure on the country level. Consequences are estimated based on a comparison of the actual post-disaster economic performance with a counterfactual projected one using an econometric modelling approach. Furthermore, it is investigated which socio-economic and other disaster related dimensions are able to explain differences in consequences the most. In that regard, rather than focusing on the time shortly before the disaster (as usually done in such analysis) special emphasis on events (such as other hazards) or situations (including socio-economic dimensions) which happened some time before the actual disaster occurred but eventually influenced the post–disaster consequences is given. Positive as well as negative consequences to GDP due to disaster events were found within the sample. However, on average, the (accumulated) consequences due to disasters were neither significant negative nor positive. In other words, this analysis did not support the hypothesis that disasters in general lead to negative consequences (or positive consequences) but rather the consequences are likely to be dependent on the pre-disaster socio-economic situation. Private financial debt as well as the general macroeconomic situation was found to be significant here to explain part of the variance. Additionally, medium term consequences were found to be dependent on the direct losses experienced, the number of inter-annual hazards occurred, as well as the amount of losses due to disasters in previous years. Furthermore, there are some indications that education plays a role here too. Some recommendations for future research based on the results found are given.