Creative destruction revisited: regional impacts of natural disasters beyond GDP

Abstract

This research shows that the economic impact of the hydrogeological disasters critically depends on the quality of local institutions. Using Italian Nomenclature of Territorial Units for Statistics (NUTS) 3 data, we identify significant divergences across regions: after a disaster, high-quality institutions promote economic recovery, even stimulating gross domestic product (GDP) growth beyond pre-disaster levels. In contrast, regions with weak institutions experience structural economic decline. This divergence pertains to economic indicators exclusively. Socially, regardless of institutional quality, affected regions experience a deterioration in poverty levels, inequality and human development. These findings suggest that post-disaster policies prioritise economic over the mitigation of social vulnerability.

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