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This paper reviews what characteristics make some economies more resilient to natural catastrophes than others. It goes on to examine the short-term economic effects of disaster, the long-term effects on economic growth, and the policies countries might adopt to better insulate themselves from the high economic costs of disasters.

It compares the disparate experiences of Haiti and Chile and analyses the reasons why similar natural disasters have such different effects. It highlights: (i) the ability of rich countries to devote resources to preventive measures before a disaster and to rebuilding after, valuing Chile's investment in sound, earthquake-proof housing and infrastructure; and (ii) the vulnerability of small and poor countries such as Haiti. It also encompasses the direct and indirect effects of disasters, in terms of immediate damage sustained to human life and to structures and of economic output that is lost following a disaster respectively; as well as the political and institutional vulnerabilities and their effect on economic growth and development.