Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/146410
Authors: 
Strulik, Holger
Trimborn, Timo
Year of Publication: 
2016
Series/Report no.: 
ECON WPS - Vienna University of Technology Working Papers in Economic Theory and Policy 07/2016
Abstract: 
Recent empirical research has shown that output and GDP per capita in the aftermath of natural disasters are not necessarily lower than before the event. In many cases, both are not significantly affected and, surprisingly, sometimes they are found to respond positively to natural disasters. Here, we propose a novel economic theory that explains these observations. Specifically, we show that GDP is driven above its pre-shock level when natural disasters destroy predominantly durable consumption goods (cars, furniture, etc.). Disasters destroying mainly productive capital, in contrast, are predicted to reduce GDP. Insignificant responses of GDP can be expected when disasters destroy both, durable goods and productive capital. We extend the model by a residential housing sector and show that disasters may also have an insignificant impact on GDP when they destroy residential houses and durable goods. We show that disasters, irrespective of whether their impact on GDP is positive, negative, or insignificant, entail considerable losses of aggregate welfare.
Subjects: 
natural disasters
economic recovery
durable goods
residential housing
economic growth
JEL: 
E20
O40
Q54
R31
Document Type: 
Working Paper

Files in This Item:
File
Size
627.25 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.