Existing research is inconclusive regarding the longer-term economic effects of earthquakes. We examine the medium-run impacts of the 2010 earthquake in Chile, the sixth-largest ever recorded, using value-added tax collection as a proxy for economic activity at the municipal level and a measure of local ground-shaking intensity. We find that the affected municipalities suffered a relevant and persistent drop in their economic activity of about 10%, 8–9 years after the event. We discuss the plausibility of the assumption of conditional parallel trends and show that the overall results are robust to using alternative estimation methods.

Extant literature concurs that fiscal transfers affect local democracy when they grant subnational governments nontax revenue. Yet there is nonetheless a mismatch between this concept and existing measures, which consider the whole transfers local governments receive, including both tax and nontax revenue. This article studies the Fondo Común Municipal (FCM), the most important intergovernmental grant in Chile, and provides a novel measure of nontax revenue. It uses this measure alongside the whole FCM transfer to test the rentier hypothesis. On the one hand, it shows that both measures increase the incumbent party vote share, although the effect of our measure is smaller. On the other hand, it finds that the FCM transfer has an impact on the probability of reelection and the competitiveness of elections, but this effect disappears when using our measure. Overall, the findings suggest that rents from transfers do not lead to strong electoral dominance in unitary states.