Destructive destruction or creative destruction? Unraveling the effects of tropical cyclones on economic growth

This paper investigates the contemporaneous and long-term effects of tropical cyclones and the related policies on economic growth and associated structural changes. We consider three distinguishing features of tropical cyclones, including wind speed, precipitation, and storm surge height, as well as one policy-related feature of tropical cyclones in Hong Kong-the issuing of the No. 8 signal. Using data from Hong Kong for the period 1980-2018, we show that although tropical cyclone landfalls on the coast of Hong Kong have much higher average wind speeds, wind speed does not have a significant influence on either overall GDP or sectoral GDP. Economic losses from tropical cyclones are driven mainly by the issuing of the No. 8 signal, a climate policy in Hong Kong that suspends daily activities in dangerous tropical cyclone weather. With an average shutdown of 1.87 days due to No. 8 signals, the economic loss is about 0.9 billion U.S. dollars. However, in the long run, the No. 8 signal policy has delayed positive impacts on total GDP and some sectoral growth. Our analysis suggests that at least five years of recovery is necessary for damage attributed to severe tropical cyclones. (C) 2021 Economic Society of Australia, Queensland. Published by Elsevier B.V. All rights reserved.

Automated summary

This paper examines the contemporary and long-term effects of tropical cyclones and related policies on economic growth and structural changes, specifically focusing on the impact of No. 8 signal policy in Hong Kong. While wind speed does not significantly affect GDP, economic losses are mainly driven by the No. 8 signal policy, which suspends daily activities during dangerous tropical cyclone weather, leading to an average economic loss of approximately 0.9 billion U.S. dollars. However, in the long run, the No. 8 signal policy has delayed positive impacts on total GDP and sectoral growth, requiring at least five years of recovery from severe tropical cyclones.