Natural Disasters, Public Spending, and Creative Destruction: A Case Study of the Philippines
Shikha Jha; Arturo Martinez; Pilipinas Quising; Zemma Ardaniel; Limin Wang | March 2018
Abstract
Typhoons, floods, and other weather-related shocks can inflict suffering on local populations and create life-threatening conditions for the poor. Yet, natural disasters also present a development opportunity to upgrade capital stock, adopt new technologies, enhance the risk-resiliency of existing systems, and raise standards of living. This is akin to the “creative destruction” hypothesis coined by economist Joseph Schumpeter in 1943 to describe the process where innovation, learning, and growth promote advanced technologies as conventional technologies become outmoded. To test the hypothesis in the context of natural disasters, this paper takes the case of the Philippines—among the most vulnerable countries in the world to such disasters, especially typhoons. Using synthetic panel data regressions, the paper shows that typhoon-affected households are more likely to fall into lower income levels, although disasters can also promote economic growth. Augmenting the household data with municipal fiscal data, the analysis shows some evidence of the creative destruction effect: Municipal governments in the Philippines helped mitigate the poverty impact by allocating more fiscal resources to build local resilience while also utilizing additional funds poured in by the national government for rehabilitation and reconstruction.
Citation
Shikha Jha; Arturo Martinez; Pilipinas Quising; Zemma Ardaniel; Limin Wang. 2018. Natural Disasters, Public Spending, and Creative Destruction: A Case Study of the Philippines. © Asian Development Bank Institute. http://hdl.handle.net/11540/8096.Keywords
Alleviating Poverty
Anti-Poverty
Extreme Poverty
Fight Against Poverty
Global Poverty
Health Aspects Of Poverty
Indicators Of Poverty
Participatory Poverty Assessment
Poverty Eradication
Poverty Analysis
Poverty In Developing Countries
Poverty Reduction Efforts
Urban Poverty
Disaster preparedness
Disaster prevention
Disaster management
Emergency relief
Flood control
Fire prevention
Natural disasters
Man-made disasters
Post-conflict recovery
Fragile states
Development Indicators
Environmental Indicators
Economic Indicators
Educational Indicators
Demographic Indicators
Health Indicators
Disadvantaged Groups
Low Income Groups
Socially Disadvantaged Children
Rural Conditions
Rural Development
Social Conditions
Urban Development
Urban Sociology
Income Distribution
Demographic Indicators
Social Justice
Poor
Economic forecasting
Health expectancy
Social groups
Political participation
Distribution of income
Inequality of income
Developing countries
Rural community development
Mass society
Social change
Social policy
Social stability
Population
Sustainable development
Peasantry
Urban policy
Urban renewal
Social change
Social accounting
Inequality of income
Economic growth
Quality of Life
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