Natural disasters and economic growth in Northeast Brazil: evidence from municipal economies of the Ceará State

Based on an unexplored data set on disasters in Brazil, the current study shows that the direct damage of natural disasters reduces the GDP growth rate of municipal economies in Ceará state, Northeast Brazil. The agriculture and service sectors are the most affected economic sectors, while the industrial sector remains unaffected by environmental shocks. Economic growth is particularly responsive to the occurrence of large natural disasters that lead municipalities to declare a state of emergency or public calamity. Regarding public policies, water supply infrastructure increases the resilience of the output growth of services to droughts, whereas disaster microinsurance helps to mitigate the effects of droughts and floods on the economic growth of agriculture in a Brazilian state where family farming is predominant and highly vulnerable to natural disasters.