The IUP Journal of Applied Economics
Interaction Between Natural Disasters and Economic Growth: ARDL Approach

Article Details
Pub. Date : Oct, 2018
Product Name : The IUP Journal of Applied Economics
Product Type : Article
Product Code : IJAE41810
Author Name : Aaqib Ahmad Bhat and Prajna Paramita Mishra
Availability : YES
Subject/Domain : Economics
Download Format : PDF Format
No. of Pages : 17

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Abstract

India, one of the emerging economies with huge demographic dividend, has been constantly facing the effects of natural disasters. Frequently, the devastating costs associated with natural disasters are considered as exogenous and outside the domain of mainstream economics. In a developing country like India with greater vulnerability, the exogeneity issue becomes more suspicious, and low economic performance at present may lead to occurrence of greater damage of future disasters. By employing ARDL model of cointegration, the study analyzes the decimate role played by natural disasters in short-run and long-run growth dynamics, thereby overcoming the problem of considering natural disasters as purely exogenous. The results indicate that natural disasters have a significant negative impact on GDP growth both in short run and long run in India. Similar retarding impact was found for per capita GDP growth which was taken as a robustness parameter. The natural negative effect is due to India being more prone to droughts and greater exposure and vulnerability of general masses to natural disasters.


Description

One of the basic concerns of growth economists over the years has been to address the issue of ‘development gap’ between developed and underdeveloped. Although various policy measures for combating and reducing the developmental gap were recommended hitherto instead of various efforts to reduce it, the gap has widened drastically (Dowrick, 1992). The reasons for this widening development gap are many; one major reason is variability to natural disasters among the various countries of the world. In some countries like India, natural disasters may set back the development process initiated and thus it may push them towards the state of being underdeveloped. However, this does not apply much to the vulnerable countries that are necessarily least developed.

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