Climate Shocks, Cyclones and Economic Growth: Bridging the Micro-Macro Gap

Abstract This paper proposes a joint empirical-structural approach to quantify the impacts of cyclone risks on economic growth and welfare. First, we review prior reduced-form approaches in a harmonised global dataset and through a theory lens. Second, we estimate cyclone impacts on structural determinants of growth (total factor productivity, capital losses and fatalities) to quantify a stochastic endogenous growth cyclone-economy model for forty vulnerable countries. Third, we study climate change impacts on cyclone risk. The results suggest negative but mostly modest impacts of risk changes on growth, which may nonetheless add up over time to substantial welfare losses, especially in the Caribbean and the United States.