NATURAL DISASTERS IN DEVELOPING COUNTRIES: IMPLICATIONS FOR ECONOMIC GROWTH

Abstract

Natural disasters have become a major challenge for developing countries because disaster events hamper economic growth and reduce the economic capacity of these economies. The economic and social vulnerabilities are high in low- and middle-income developing countries, the adverse effects of disaster events are more pronounced where human capital, investment, trade, institutional and productive capacity remain limited. This study aims to examine the influence of natural disasters on economic growth in developing countries using panel data over the period 2000 to 2024. For empirical estimation, this study employs second-generation econometric techniques such as the Method of Moments quantile regression (MMQR), which captures heterogeneous effects across the quantile distribution. Moreover, to account for the robustness of the estimated relationship between variables, this study employs Bootstrap Quantile Regression (BSQR). The study findings indicate a negative and statistically significant relationship between natural disasters and economic growth. Natural disasters lower domestic and foreign investment in the economy and also destroy natural resources and output. Furthermore, natural disaster-related damages affect supply chain networks and transportation activities, causing a higher cost of production and shortages of goods in these countries. These events raise the prices of goods and services and lower aggregate demand and consumption, which harm the economic growth of developing economies. The study suggested that policy makers, official organizations and government institution should focus more on increasing economic growth activities and reducing the severe impact of natural disaster events in developing economies.