Development after Disaster: Multidecadal Impacts of Tropical Cyclones upon Long-run Economic Growth

Weather-related disasters lead to immediate costs in the billions of dollars each year, and this loss informs the strategies for disaster mitigation and recovery. However, the causal effect of natural disasters on long-run economic development remains unclear. We reconstruct every country's physical exposure to the universe of tropical cyclones (TCs) during 1950-2008 using the International Best Tracks Archive for Climate Stewardship (IBTrACS) and then exploit year-to-year variation in cyclone strikes to identify the effect of disasters on GDP growth. Linking this economic data to a physical model of TC hazard, we are the first analysis to deconvolve the long-run cumulative impact of year-to-year changes in TC incidence. We reject long-standing hypotheses that disasters stimulate growth via "creative destruction" or that losses disappear following transfers of wealth. Instead, we find robust evidence that national incomes decline, relative to their pre-disaster trend, and do not recover within twenty years. This result is consistent across income sources, regions, countries' geographic size, and income level. Global patterns of climate-based adaptation, in addition to similar long-run changes in consumption, investment, trade and international aid, further corroborate this finding. Consistent with the idea that long-term loans finance the replacement of lost capital, national income loss arises from a small reduction of annual growth rates spread across the decades following disaster. The cumulative effect of this persistently suppressed growth is significant and large: a 90th percentile event reduces per capita incomes by 7.4% two decades later (fig. A). The gradual nature of these losses render them inconspicuous to a casual observer, however simulations indicate that they have dramatic influence over the long-run development of countries that face regular exposure to TCs (fig. B). Our results indicate that the true cost of a disaster may not only be the immediate cost, but also the long-term suppression of growth opportunities within a country. We suggest that it is essential to consider this when estimating the losses associated with a disaster, and plan for it accordingly. This finding transforms our understanding of a society's resilience to disasters, and necessitates a new viewpoint to be considered when we think of weathering natural hazards.;