WE would like ot thank two anonymous refereers William Blankenau, Gerhard Glomm, Hiroyuki Hashimoto, Denton marks, Yuichi Morita, Masaya Sakuragawa, Etsuro Shiojil, and weminar participants at Knasai Macroecnonomic Workshop, aMacalester College, Midwesxzt Economic Association Annual Meeting, Norhtern lowa University, Unviersiy of Wisconsin-Whitewater, adn Yokoharma National Unvirsity for helpful comments and suggestions.
DO NATURAL DISASTERS PROMOTE LONG-RUN GROWTH?
Version of Record online: 26 MAR 2007
Volume 40, Issue 4, pages 664–687, October 2002
How to Cite
Skidmore, M. and Toya, H. (2002), DO NATURAL DISASTERS PROMOTE LONG-RUN GROWTH?. Economic Inquiry, 40: 664–687. doi: 10.1093/ei/40.4.664
- Issue online: 26 MAR 2007
- Version of Record online: 26 MAR 2007
In this article, we investigate the long-run relationships among disasters, capital accumulation, total factor productivity, and economic growth. The cross-country empirical analysis demonstrates that higher frequencies of climatic disasters are correlated with higher rates of human capital accumulation, increases in total factor productivity, and economic growth. Though disaster risk reduces the expected rate of return to physical capital, risk also serves to increase the relative return to human capital. Thus, physical capital investment may fall, but there is also a substitution toward human capital investment. Disasters also provide the impetus to update the capital stock and adopt new technologies, leading to improvements in total factor productivity.