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DO NATURAL DISASTERS PROMOTE LONG‐RUN GROWTH?
Author(s) -
Skidmore Mark,
Toya Hideki
Publication year - 2002
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1093/ei/40.4.664
Subject(s) - physical capital , capital deepening , economics , total factor productivity , human capital , investment (military) , capital consumption allowance , capital (architecture) , return of capital , economic capital , capital intensity , stock (firearms) , natural disaster , productivity , rate of return , capital accumulation , financial capital , return on investment , capital formation , macroeconomics , production (economics) , investment performance , finance , economic growth , engineering , geography , law , archaeology , political science , mechanical engineering , politics , meteorology
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.