Natural disasters in a two-sector model of endogenous growth

Ikefuji, Masako; Horii, Ryo

doi:10.1016/j.jpubeco.2012.05.005

Cited by 46 publications

(26 citation statements)

References 27 publications

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“…4 See Hallegatte and Przyluski (2010) for illustrations of the disaster effect over time. Other theoretical applications on the impact of natural disaster occurrence on output dynamics do not provide a clear cut prediction either (see, i.e., Soretz, 2007;Hallegatte and Dumas, 2009;Narita et al, 2010;Ikefuji and Horii, 2012).…”

Section: Introductionmentioning

confidence: 99%

Naturally negative: The growth effects of natural disasters

Felbermayr

Gröschl

2014

Journal of Development Economics

407

273

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Naturally Negative: The Growth Effects of Natural Disasters Abstract Growth theory predicts that natural disasters should, on impact, lower GDP per capita. However, the empirical literature does not offer conclusive evidence. Most existing studies use disaster data drawn from damage records of insurance companies. We argue that this may lead to estimation bias as damage data and the selection into the database may correlate with GDP. We build a comprehensive database of disaster events and their intensities from primary geophysical and meteorological information. In contrast to insurance data, our GeoMet data reveal a substantial negative and robust average impact effect of disasters on growth. The worst 5% disaster years come with a growth damage of at least 0.45 percentage points. That average effect is driven mainly by very large earthquakes and some meteorological disasters. Poor countries are more strongly affected by geophysical disasters; rich more by meteorological events. International openness and democratic institutions reduce the adverse effect of disasters. JEL-Code: O440, Q540. Terms of use: Documents in

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Section: Introductionmentioning

confidence: 99%

Naturally negative: The growth effects of natural disasters

Felbermayr

Gröschl

2014

Journal of Development Economics

407

273

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“…$ Ikefuji and Horii (2012) examine the optimal growth rate and the carbon tax in an economy where private capital is subject to stochastic depreciation due to climate change. They assume, however, that these stochastic shocks are idiosyncratic and reect a large number of independent small climate events.…”

Section: Related Literaturementioning

confidence: 99%

Escaping Damocles' Sword: Endogenous Climate Shocks in a Growing Economy

Bretschger

Vinogradova

2018

SSRN Journal

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Climate economics has been criticized for ignoring uncertainty, catastrophic changes, and tipping points (Stern 2016). The present paper addresses these issues. We consider multiple climate shocks which are recurring, random, uninsurable, and potentially large. The associated damages and the hazard rate are endogenously driven by the stock of greenhouse gases. We provide closed-form solutions for the optimal climate policy and the growth rate of the economy. The optimal path is characterized by a constant growth rate of consumption and of the capital stock until a shock arrives, triggering a downward jump in both variables. The mitigation policy consists of a simple and intuitive rule which requires spending a constant fraction of output on emissions abatement. In a quantitative assessment we show that under favorable conditions the abatement expenditure represents 0.5% of output, equivalent to $37 per ton carbon. Under less favorable conditions with respect to abatement technology and damages, coupled with a relative risk aversion which exceeds unity, the abatement propensity increases to 2.9%, equivalent to $212 per ton carbon, and it jumps to a striking 10% in the pessimistic scenario involving severe shocks and a possible crossing of a tipping point. JEL Classication: O10, Q52, Q54

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“…The elasticity of the marginal productivity of physical capital at (k, 1) is given by: 8) where the second equality follows from (A.3a) and the last one from (A.2a). At the steady state, by substituting (3.5), we have:…”

Section: Stability and Properties Of The Transition Pathsmentioning

confidence: 99%

“…For the same reason, we ignore the possibility that the level of economic activity increases the risk of disasters such as for the relationship between global warming and climatic disasters. This relationship is analyzed by Ikefuji and Horii (2012) in the context of sustainable growth and a pollution tax.…”

Section: Introductionmentioning

confidence: 99%

A theory of disasters and long-run growth

Akao

Sakamoto

2018

Journal of Economic Dynamics and Control

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We examine the long-term consequences to economic growth of disasters using a discrete-time endogenous growth model. We consider two types of hypothetical disasters: historical disasters, which follow a Bernoulli process, and periodic disasters, which are taken as a regular event by assuming that one period is a sufficient time period. We show that the effects of historical disasters on the steady state growth rate depend on the intertemporal elasticity of substitution for consumption.Specifically, when it is less than one, more destructive disasters or more frequent occurrence of historical disasters foster investment in human capital, which results in a higher economic growth rate. This conditionally supports the empirical finding: disasters may positively affect long-run economic growth. We also show the effects of historical and periodic disasters on resource allocation and industrial composition at the steady state and on the convergence speed.

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Natural disasters in a two-sector model of endogenous growth

Cited by 46 publications

References 27 publications

Naturally negative: The growth effects of natural disasters

Naturally negative: The growth effects of natural disasters

Escaping Damocles' Sword: Endogenous Climate Shocks in a Growing Economy

A theory of disasters and long-run growth

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