The impact of the Indian Ocean tsunami on Aceh’s long-term economic growth

Existing studies typically find that natural disasters have negative economic consequences, resulting in, at best, a recovery to trend after initial losses or, at worst, longer term sustained losses. We exploit the unexpected nature of the 2004 Indian Ocean tsunami for carrying out a quasi-experimen...

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Bibliographic Details
Published inJournal of development economics Vol. 141; p. 102365
Main Authors Heger, Martin Philipp, Neumayer, Eric
Format Journal Article
LanguageEnglish
Published Elsevier B.V 01.11.2019
Subjects
Q54
O40
O47
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Summary:Existing studies typically find that natural disasters have negative economic consequences, resulting in, at best, a recovery to trend after initial losses or, at worst, longer term sustained losses. We exploit the unexpected nature of the 2004 Indian Ocean tsunami for carrying out a quasi-experimental difference-in-differences analysis of flooded districts and sub-districts in Aceh. The Indonesian province saw the single largest aid and reconstruction effort of any developing world region ever afflicted by a natural disaster. We show that this effort triggered higher long-term economic output than would have happened in the absence of the tsunami. •Aceh experienced large scale economic loss from the 2004 Indian Ocean tsunami.•We analyse the impact of aid-financed reconstruction on economic output.•We find a sustainable recovery beyond counterfactual trend in flooded districts.•Human intervention can turn a natural disaster into an economic success story.
ISSN:0304-3878
1872-6089
DOI:10.1016/j.jdeveco.2019.06.008