@misc{37518,
title = {Lights Out: Measuring the Economic Effect of Natural Disasters in Andean Countries},
author = {Alzamora, Miguel and Ballesteros Quiroga, Henry Alexander and Cárdenas, Daniel and Chávez, Augusto and Díaz, Emily and Giles Álvarez, Laura and Larrahondo, Cristhian and León, Sany and Serrudo, Luis Fernando and Toapanta, Xavier and Valdivia, Daniela},
year = {2025},
doi = {10.18235/0013845},
abstract = {This study analyzes the impact of natural disasters on subnational economic activity in the Andean Regions countries (Bolivia, Colombia, Ecuador and Peru). The main purpose of this analysis is to quantify the magnitude and persistence of the economic downturn that takes place during and after natural disasters, overcoming the limitations of traditional statistics through the use of high-frequency satellite imagery. Nighttime luminosity data is used to complement subnational GDP measures and as a proxy for economic activity. The methodology is based on three complementary approaches: (1) a monthly estimate of subnational GDP adjusted for night lights, integrating official and satellite data using the Denton-Cholette method; (2) a panel analysis, following an empirical model developed by Cavallo et al. (2021) to measure changes in economic activity during and after a natural disaster; and (3) an application of a synthetic control method to estimate the causal impact of natural disasters, using the effect of Hurricane Iota in Providencia, Colombia. The results show that, on average, the light-adjusted GDP falls between 0.29% and 1.29% in the month of the disaster. Although the negative correlation persists in the following months, it is not statistically significant. The case study of Providencia shows a 75% fall in the luminosity index when Hurricane Iota hit the island. It then took the island 14 months to recover pre-event levels of economic activity and required almost three years to converge and even exceed pre-event growth levels. The study highlights the value of using night lights for economic monitoring in the event of a natural disaster and the importance of comprehensive recovery strategies for the loss and subsequent recovery of economic activity.},
url = {https://doi.org/10.18235/0013845}
}