Poster #117 - The Impact of Natural Disasters on Policy Stability: A Test of Punctuated Equilibrium Theory in China

• In Event: Saturday Poster Luncheon

Abstract

Research Motivation

Policy stability and change are fundamental concerns in public policy research. The increasing frequency and severity of natural disasters not only strain fiscal resources but also force governments to reassess policy priorities, potentially destabilizing long-term policy equilibria. While existing studies have extensively examined internal mechanisms of policy dynamics—particularly through the lens of punctuated equilibrium theory, the role of external shocks, such as nature disasters, remains underexplored. This study seeks to bridge the gap in punctuated equilibrium theory by investigating whether and how natural disasters contribute to policy instability, with a focus on China—a country prone to diverse disasters and characterized by a unique policy-making structure.

Research Questions

This study addresses the following key questions:

•    Do natural disasters (measured by frequency and intensity) increase the likelihood of policy punctuation, leading to decreased policy stability?

•    Heterogeneity: Which types of disasters (e.g., hydrological, meteorological, climatological) have the strongest destabilizing effects?

•   Policy Domain Variation: Are certain policy areas (e.g., public administration) more susceptible to disaster-induced instability than others?

Data & Variables

•      Dependent Variable: Policy stability, operationalization strategy as below:

   1. calculate the inflation-adjusted variation of budgeted and actual fiscal expenditures (1985–2023) across China’s 31 provinces;

   2. the mixture model classify the variation of these two variables into equilibrium and punctuated subgroups

•      Independent Variables: 

     Disaster frequency (count of disasters per year);        Disaster intensity (economic losses normalized by GDP)

•      Control Variables: Economic growth, political cycles, provincial fiscal capacity.

Analytical Approach

•      Finite Mixture Model:

   Classifies fiscal variables into two subgroups—equilibrium (low variation) and punctuated (high variation)—to assess disaster-induced shifts. Test the relationship between disaster variables and policy stability.

 

Main Findings:

•    Both disaster frequency and intensity significantly increase the probability of policy punctuation, confirming their destabilizing effect.

•    Policies in the punctuated subgroup exhibit abrupt fiscal expenditure fluctuations, consistent with punctuated equilibrium theory.

•    Budgetary plans (1992–2020) show no significant response to disasters, suggesting that China’s budget rigidity may buffer against immediate shocks, whereas final expenditures adjust more dynamically.

Heterogeneity Effects:

•    Hydrological disasters (e.g., floods) have the strongest negative impact on stability.

•    Public administration policies are particularly vulnerable to disaster-induced instability.

 

Contribution

This study advances the understanding of policy dynamics in crisis contexts while offering actionable insights for disaster governance and fiscal management.

Theoretical Contributions

•      Expands punctuated equilibrium theory by incorporating external shocks as a driver of policy instability. Demonstrates that disasters act as focusing events , accelerating policy shifts from equilibrium to punctuation.

Empirical & Policy Contributions

•      Provides evidence that different disaster types have varying destabilizing effects, aiding targeted disaster response strategies.   Highlights the asymmetric impact of disasters on budgetary planning vs. final expenditures, offering insights for fiscal resilience.

Implications for Future Research

•      Encourages further exploration of cross-country comparisons to assess institutional moderators. Calls for integrated models combining internal policy feedback and external shocks.

Author

• Huiping li, Shanghai University of Finance and Economics
  Presenting Author