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  3. American Economic Review
  4. May 2015
  5. Geography, Depreciation, and Growth

Geography, Depreciation, and Growth

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Abstract

It has been proposed that geography influences economic growth for many reasons. Previous analyses of comparative development seem to have sidestepped the question of location-dependent depreciation. However the construction of new measures of tropical cyclone exposure enables us to consider the potential impact of this single source of capital depreciation. Using an estimate of asset destruction due to tropical cyclones, we identify the "sandcastle depreciation" rate, and find support for location-dependent depreciation by looking at average growth rates. This leads us to propose that heterogeneous and geographically-dependent depreciation rates may play an important role in global patterns of economic development.

Citation

Hsiang, Solomon M., and Amir S. Jina. 2015. "Geography, Depreciation, and Growth." American Economic Review, 105 (5): 252-56. DOI: 10.1257/aer.p20151029

Additional Materials

JEL Classification

  • E22 Investment; Capital; Intangible Capital; Capacity
  • E23 Macroeconomics: Production
  • O13 Economic Development: Agriculture; Natural Resources; Energy; Environment; Other Primary Products
  • O47 Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
  • Q54 Climate; Natural Disasters and Their Management; Global Warming
  • R11 Regional Economic Activity: Growth, Development, Environmental Issues, and Changes