Natural disasters and the economy: some recent experiences from Southeast Asia

Abstract

This paper uses recent examples of natural disasters from Southeast Asia to illustrate some important arguments discussed in the literature on natural disasters and the economy. First, the severity of the consequences of disasters depends not only on the natural hazards, but also on societal factors. Second, the effects of the disasters on physical and human capital could go far beyond the directly observable loss of properties and lives. Third, disasters could have positive long‐term consequences if they lead to a change in the total factor productivity of the economy. Fourth, the effects of disasters could spread beyond the country of origin, naturally and economically. Finally, assistance from the government provides implicit insurance that could crowd out private insurance, but the failures of the government in dealing with recent catastrophic disasters may help reduce the extent of this effect.