Fiscal Storms: Public Spending and Revenues in the Aftermath of Natural Disasters

Recent research in both the social and natural sciences has been devoted to increasing our ability to predict disasters, prepare for them and mitigate their costs. Curiously, we appear to know very little about the fiscal consequences of disasters. The likely fiscal impact of a natural disaster has not been examined before in any comparable or comparative framework. We estimate and quantify the fiscal consequences of natural disasters using quarterly fiscal and disaster data for a large panel of countries. In our estimations, we employ a panel VAR framework that is similar to Burnside et al. (Journal of Economic Theory, 2004), that also controls for the business cycle. We find fiscal behavior in the aftermath of disasters in developed countries that can best be characterized as counter-cyclical. In contrast, we find pro-cyclical decreased spending and increasing revenues in developing countries following large natural disasters. We quantify these effects.natural disasters, fiscal policy

0 What do Exogenous Shocks Tell Us about Growth Theories?

The sources of economic growth and development have been puzzling economists from the modern dawn of the profession. While the Solow-Swan neo-classical model dominated research on growth in the 1960s and 1970s, the 1980s saw the emergence of growth theories that disputed, largely on theoretical grounds, the Solow-Swan assumptions and conclusions. In this paper, we do not examine the determinants of the level of per capita income as an indication that a certain theory has better explanatory power. Rather, we focus on the dynamics of growth following external exogenous shocks (natural disasters). We argue that the data analysis we present suggests that the neoclassical model does not accord very well with the growth experience of developing countries

Fiscal storms: public spending and revenues in the aftermath of natural disasters

We estimate and quantify the fiscal consequences of natural disasters using quarterly fiscal data for a large panel of countries. In our estimations, we employ a panel vector autoregression framework that also controls for the business cycle. In developed countries, we find fiscal behavior in the aftermath of disasters that can best be characterized as counter-cyclical. In contrast, we find pro-cyclical decreased spending and increasing revenues in developing countries following large natural catastrophes. These pro-cyclical fiscal dynamics are likely to worsen the adverse consequences of natural disasters on middle- and low-income countries. We quantify these dynamics.