Natural disasters, economic growth and spatial spillovers: Evidence from a flash flood in Brazil.

In this paper, a flash flood that occurred in the Brazilian state of Santa Catarina in 2008 is used to investigate the existence of spatial spillovers from natural disasters in geographically‐linked areas. In order to do so, we estimated a Difference‐in‐Differences model that explicitly allows for the existence of spatial interactions within affected and unaffected regions. Our results show that municipalities directly affected by the flood suffered an 7.6% decrease in GDP per capita in the year of the disaster. Three years after the flood, however, GDP per capita rebounded back to pre‐disaster levels in all sectors but the Agricultural sector. Finally, our spatial estimations show that spillovers exist and are economically relevant. [ABSTRACT FROM AUTHOR]