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The effects of post-natural disaster reconstruction expenditure on output
by Christos Chrysanthakopoulos | Athanasios Tagkalakis
Abstract ID: 3
Event: Conference 2024
Keywords (up to 5): Government Spending, Natural disasters, Output

Using a panel of 118 advanced, emerging market and developing economies over the period 1995-2021, we examine the effects of post-natural disaster reconstruction, through public spending, on economic activity. Our findings indicate that an increase in real spending to fund reconstruction activities following both a major and an extreme natural disaster result in an increase in real GDP. More specifically, the peak response of real GDP is 0.7% and occurs 5 years after a major natural disaster. The findings are affected by various states of nature, such as the level of the public debt ratio and financial development, trade openness, the presence of fiscal rules, the level of government effectiveness and the exchange rate regime. In these cases, the peak response of real GDP is more sizeable reaching, at times, values above 1%.

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