The usual, “Hurricane will raise GDP” stories are circulating and some of my free market friends are conceding the point but saying that not all rises in GDP are good.
However, there is a literature on this subject (Cowen’s third law anyone?), and the best paper I know in that literature does not find ANY positive effects of large natural disasters on GDP!
Paper is called Catastrophic Natural Disasters and Economic Growth in RESTAT 2013. Here’s a link to an earlier, ungated version.
The following is from the abstract:
This paper examines the short and long-run average causal impact of catastrophic natural disasters on economic growth by combining information from comparative case studies. The counterfactual of the cases studied is assessed by constructing synthetic control groups, taking advantage of the fact that the timing of large sudden natural disasters is an exogenous event. It is found that only extremely large disasters have a negative effect on output, both in the short and long run. … It is also found that smaller, but still very large natural disasters, have no discernible effect on output.
So, huge disasters, negative. Only very large? no effect.
Here’s the graph for the 1% of largest disasters:
And here’s for the top 10% of disasters:
NATURAL DISASTERs ARE NOT A BOON TO ECONOMIC GROWTH!!!!!!!!