The economics of natural disasters in a developing country: The case of Vietnam

We examine the impact of natural disasters on annual output growth in Vietnam. Using provincial data for primary and secondary industries, we employ the Blundell–Bond General Method of Moments procedure to estimate the impact of disasters on the macroeconomy. We show that more lethal disasters result in lower output growth but that disasters that destroy more property and capital actually appear to boost the economy in the short-run. This is consistent with the ‘investment-producing destruction’ hypothesis that we outline. However, we find that disasters have a different macroeconomic impact in different geographical regions; these differences are potentially related to the ability to generate transfers from the Vietnamese central government.