The impact of climate disaster on international trade: Evidence from developed and developing countries.

A climate disaster can be devastating, but its challenges and losses provide some opportunities to other countries. Therefore, in this paper, we examine the impact of climate risk on international trade with a particular focus on developed and developing countries. Using a large sample of 160 countries between 2006 and 2019, we find that climate disaster is positively associated with high international trade. An increase in the climate disaster index will lead to an increase of about 5.9% in imports as a proportion of GDP. This is significant given that the mean of imports of the sample countries is 48%. Regarding the flow of trade, importation is likely to increase by about 6.7% and export to decrease by 0.65% after the occurrence of climate disasters in developing countries. Conversely, we did not find significant changes in imports and a weak association with exports for developed countries. We attribute this differential impact of climate disasters between developed and developing countries to the preparedness and risk mitigation mechanism in developed countries. The result suggests that the long-term effect of climate disasters increasing overall international trade is due to increasing imports in developing countries. Additional analyses demonstrate the robustness of these results to different model specifications and measurements of variables. Our results imply that climate change and its associated natural disasters offer more trade opportunities for developed countries than developing countries, highlighting the climate injustices between the high and low climate change contributors.