Institution and decomposition of natural disaster impact on growth

Purpose – This paper aims to investigate whether natural disasters enhance efficiency improvement, capital accumulation and technological progress. Further, this paper examines whether the influence of naturals disasters depends on the legal origin. Design/methodology/approach – For this purpose, by using long-term panel data, this paper decomposes productivity growth measured by the growth of output per labor unit into three components of efficiency improvement, capital accumulation and technological progress. Findings – After controlling for countries' specific unobservable characteristics and year-specific effects, the paper found that impacts of natural disasters vary according to specification. However, the natural disasters enhance capital accumulation and technological progress for non-French legal origin countries, while the disasters have no effect on them for French legal origin countries. Originality/value – The role played by natural disasters on capital accumulation and Schumpeterian creative destruction depends on historical institutional conditions. Hence, it is important to consider the interaction between exogenous shock and institutions when examining economic growth.