Types of natural disasters and their fiscal impact

I. Koetsier

Research output: Working paperAcademic

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Abstract

This study investigates the impact of natural disaster on government debt for
different disaster types. It includes 163 countries for the period from 1971 to 2014. We apply a panel synthetic control methodology to estimate the impact of natural disasters on government debt. Our findings generally reveal a considerable increase of government debt in the aftermath of a natural disaster, except for droughts. Earthquakes, on average, lead to an increase in government debt of 30.2% of GDP. Floods increase government debt by 7.7% of GDP, while storms increase the level of government debt by 9.5% of GDP compared to the synthetic control group. This study shows that the manner of identifying disaster matters for the estimated disaster impact. Natural disasters are a considerable contingent liability for governments. The effect of natural disasters is even larger than the fiscal costs of financial sector bailouts during the financial crisis.
Original languageEnglish
Place of PublicationUtrecht
PublisherUU USE Tjalling C. Koopmans Research Institute
Number of pages49
Volume17-18
Publication statusPublished - 2017

Publication series

NameU.S.E. Discussion paper series
No.18
Volume17
ISSN (Electronic)2666-8238

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