Subnational governments, at the regional and local levels, play an important role in the prevention, management and recovery from natural disasters.
In this paper, Joao Tovar Jalles and co-author provide empirical evidence, based on impulse response functions, that the occurrence of natural disasters is associated with an increase in the subnational shares of government spending and revenue in the years following these shocks. These decentralization effects vary according to specific shocks and are conditional on the business cycle: they tend to be stronger when the shocks materialize during economic expansions.
