Alternatives to GDP - Measuring the impact of natural disasters using panel data

Article type: Research Article

Authors: Döpke, Jörg^a | Maschke, Philip^{b; *}

Affiliations: [a] University of Applied Sciences Merseburg, Germany | [b] Halle Institute for Economic Research (IWH), Germany

Correspondence: [*] Corresponding author: Philip Maschke, Contact: Halle Institute for Economic Research (IWH), Kleine Maerkerstraße 8, D-06108 Halle (Saale), Germany. Tel.: +49 345 7753860; Fax: +49 345 7753820; E-mail:philip.maschke@iwh-halle.de

Abstract: A frequent criticism of GDP states that events that obviously reduce welfare of people can nevertheless increase GDP per capita. We use data of natural disasters as quasi experiments to examine whether alternatives to GDP (Human Development Index, Progress Index, Index of Economic Well-Being and a Happiness Index) lead to more plausible responses to disasters. Applying a Differences-in-Differences approach and estimates from various panels of countries we find no noteworthy differences between the response of real GDP per capita and the responses of suggested alternative welfare measures to a natural disaster except for the Human Development Index.

Keywords: Natural disasters, alternative welfare indicators, welfare measurement

DOI: 10.3233/JEM-160429

Journal: Journal of Economic and Social Measurement, vol. 41, no. 3, pp. 265-287, 2016