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Climate change and natural disasters: Macroeconomic performance and sustainable development
chapterposted on 02.12.2020, 00:00 by Michael Dzator, J Dzator, A Acheampong
The increasing frequency of natural disasters and the real-time global coverage of climate-related events and headline news about their damage to property and loss of lives heighten the desires of international organizations, policymakers, and researchers to better understand the impacts of the climate change and natural disaster on economic development. It is argued that natural disasters could affect output per capita; however, the empirical literature remains inconclusive. The current study, therefore, investigates the short- and long-run impact of composite natural disaster and its specific types such as earthquake, drought, storms, and floods on economic growth, private sector investment, and public sector spending using a comprehensive panel dataset for 61 countries for 1960–2018. The empirical results indicate that in the short run the composite indicator for natural disaster and flood significantly reduces economic growth while other specific types of natural disasters such as drought, storm, and earthquake exert an insignificant negative effect on economic growth. The results also indicate that in the long run, natural disasters have negligible impacts on economic growth. Our findings further suggest that none of the proxies of natural disaster exert a significant effect on public sector spending. On the other hand, the results reveal that in the short run, only flood and earthquake significantly increase private sector investment, but drought retards private sector investment in both short and long run.