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Natural Capital Depletion: the Impact of Natural Disasters on Inclusive Growth

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Abstract

The impact of natural disasters on inclusive growth has received little attention from empirical analyses compared to the attention focused on other growth parameters. Thus, this study considers country-level panel data (108 countries over 25 years) and estimates three econometric models to explore the nexus of natural capital depletion and climate-related natural disasters. The results indicate that the impact is nonlinear: there is an inverted ‘U’ shape for small-to-medium level disasters in which natural capital depletion is increasing. The impact of natural disasters is higher when the magnitude of resource depletion is lower or higher. Similarly, trade openness, FDI and GDP growth rate are other important determinants of natural capital. This paper provides insights into how sustainable development can be pursued by means of conserving natural resources in the face of frequent climate-related disasters. It particularly emphasizes the importance of considering small-to-medium size disasters and the threat of disaster in countries with low levels of natural capital depletion.

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Notes

  1. The inclusive growth approach is the focus of international organizations (see, World Bank 2012: UNEP 2011).

  2. The economical, societal and sustainable importance of natural capital is well documented in papers published in well-known journals (see, for example, Ekins et al. 2003; De Groot et al. 2003, UNEP 2011).

  3. Highlighting the importance of natural capital in terms of sustainability and the economy, De Groot et al. (2003) present the natural capital index for Europe.

  4. The traditional measure of GDP does not include or reflect sustainability. Particularly, it does not show whether sustainable development is in line with United Nations (UN) sustainable development goals.

  5. Despite some criticism of the use of the EM-DAT database, almost all studies have used this database for empirical research. The EM-DAT database is a highly reliable and comprehensive database.

  6. The EM-DAT database reports only direct damages. All such disasters are associated with indirect costs as well. Economists have used indirect valuation methods.

  7. World Bank, World Development Indicators, available from: http://databank.worldbank.org/data. OECD (2017), Gross domestic product (GDP) (indicator). doi: 10.1787/dc2f7aec-en (Accessed on 12 January 2017).

  8. Database prepared for forthcoming inclusive wealth report, 2017 (Urban Institute and UNEP 2018).

  9. EM-DAT data base.

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Acknowledgements

This work was supported by the following Grant in Aid from the Ministry of Education, Culture, Sports, Science and Technology in Japan (MEXT): Grant in Aid for Specially Promoted Research 26000001. Any opinions, findings, and conclusions expressed in this material are those of the authors and do not necessarily reflect the views of the MEXT.

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Authors and Affiliations

  1. Urban Institute, Department of Urban and Environmental Engineering, Faculty of Engineering, Kyushu University, 744, Motooka Nishi-ku, Fukuoka, Japan

    Darshana Rajapaksa, Moinul Islam & Shunsuke Managi

  2. QUT Business School, Queensland University of Technology, Level 8, Z Block, Gardens Point, 2 George St, Brisbane, QLD 4000, Australia

    Darshana Rajapaksa & Shunsuke Managi

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  1. Darshana Rajapaksa
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  2. Moinul Islam
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  3. Shunsuke Managi
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Correspondence to Shunsuke Managi.

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Rajapaksa, D., Islam, M. & Managi, S. Natural Capital Depletion: the Impact of Natural Disasters on Inclusive Growth. EconDisCliCha 1, 233–244 (2017). https://doi.org/10.1007/s41885-017-0009-y

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