Department of Economics
University of Chicago
5757 S University Ave
Chicago, IL 60637
NBER Working Papers and Publications
|July 2014||The Causal Effect of Environmental Catastrophe on Long-Run Economic Growth: Evidence From 6,700 Cyclones|
with Solomon M. Hsiang: w20352
Does the environment have a causal effect on economic development? Using meteorological data, we reconstruct every country's exposure to the universe of tropical cyclones during 1950-2008. We exploit random within-country year-to-year variation in cyclone strikes to identify the causal effect of environmental disasters on long-run growth. We compare each country's growth rate to itself in the years immediately before and after exposure, accounting for the distribution of cyclones in preceding years. The data reject hypotheses that disasters stimulate growth or that short-run losses disappear following migrations or transfers of wealth. Instead, we find robust evidence that national incomes decline, relative to their pre-disaster trend, and do not recover within twenty years. Both rich and...