Jul 1, 2014

The Casual Effect Of Environmental Catastrophe On Long-run economic Growth

Solomon M. Hsiang, Amir S. Jina
National Bureau of Economic Research
  • Utilizes Meteorological data from 6,700 cyclones to reconstruct every country's exposure to the universe of tropical cyclones during 1950-2008 to exploit random within-country year-to-year variation in cyclone strikes to identify the causal effect of environmental disasters on long-run economic growth
  • Compares each country's growth rate to itself in the years immediately before and after exposure, accounting for the distribution of cyclones in preceding years
  • Finds robust evidence that national incomes decline, relative to their pre-disaster trend, and do not recover within twenty years
  • Concludes that a 90th percentile event reduces per capita incomes by 7.4% two decades later, effectively undoing 3.7 years of average development, and thatclimate change will be roughly $9.7 trillion more expensive than previously thought