Essays on Economic Impacts of Disasters: The Aggregate and Disaggregate Evidence
This thesis is the product of three academic essays, of which each one attempts to answer a few questions related to the economics of disasters using both aggregate and disaggregate data. In the first essay, I examine the response of international reserves to external shocks by using a quasi-experiment of earthquakes on a panel of 103 countries. The results show that in the five years following a quake: (i) Countries exposed to it accumulate reserves ex-post for precautionary reasons, supported by the inflow of foreign assistance; (ii) Quake-prone countries tend to hold fewer reserves relative to the non-prone countries, suggested by the richer set of other disaster preventive measures in place for the former; (iii) The patterns of reserves holding post-earthquake vary with a country’s income level and other macroeconomic fundamentals. The second essay uses disaggregated microdata of New Zealand firms from 2001 to 2019 to quantify the short-to-medium impacts of the 2010/2011 Canterbury earthquakes on businesses. The findings show that the average annual investment of Canterbury firms over the period 2011-2019 is 2.2% higher than elsewhere. In terms of persistence, the immediate impact is just around 1.6% in 2011 and the estimates increase significantly over the next few years before gradually dropping since 2015. Regarding the heterogeneity by sector and firm size, the estimates seem to be generally influenced by the monetary damages caused by the earthquakes. In particular, these results are driven by the manufacturing (4.6%) and construction sectors (3.5%), followed by services (2.7%). Small and medium firms increased investment by 1.7% and 6.1% respectively. In terms of the financial sources for the reconstruction, affected firms in the region increased shareholder funds and long-term debt. In the third and last essay, I evaluate the 1968 H3N2 Flu pandemic’s economic cost in a cross-section of 52 countries. Using excess mortality rates as a proxy for the country-specific severity of the pandemic, I find that the average mortality rate (0.0062% per pandemic wave) was associated with a decline in output of 2.4% over the two pandemic waves. The estimates also suggest the losses in consumption (-1.9%), investment (-1.2%), and productivity (-1.9%) during the outbreaks. The study adds to the current literature new empirical evidence on the economic consequences of a past pandemic in light of the potential impacts of the Covid-19 pandemic on productivity.