Natural disasters, growth and institutions: A tale of two earthquakes

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract. We examine the impact of natural disasters on economic growth by applying a synthetic control approach. In contrast to previous literature, we adopt a within-country perspective, which allows us to use richer and more comparable data and to better define the geographic area hit by the disaster. We examine two large-scale earthquakes that occurred in two different Italian regions in 1976 and 1980. According to our findings, the short-term effects are negligible in both regions, though they become negative if we simulate the GDP that would have been observed in absence of financial aid. In the longterm, the two regions show opposite effects on GDP per capita, largely reflecting different patterns of the TFP. These opposing outcomes are consistent with the idea that a quake (and related financial aid) might either increase technical efficiency via a disruptive creation mechanism or reduce it by stimulating corruption, distorting the markets and deteriorating social capital. We show that the latter case is more likely to occur in areas with lower pre-quake institutional quality. Moreover, institutional quality itself changes in response to the shock and these patterns are correlated to those of the TFP. Overall, our evidence suggests that natural disasters are likely to exacerbate regional differences in economic and social development. Terms of use: Documents in

Price shocks in regional markets: Japan's Great Kantō Earthquake of 1923

“…See, for example, Kellenberg and Mubarak, ‘Economics of natural disasters’; Cavallo and Noy, ‘Economics of natural disasters’; Toya and Skidmore, ‘Economic development’; Cavallo, Galiani, Noy, and Pantano, ‘Catastrophic natural disasters’; Neumeyer, Plümper, and Barthel, ‘Political economy’; Barone and Mocetti, ‘Natural disasters’; Cassar, Healey, and von Kessler, ‘Trust, risk, and time preferences’; Okuyama, ‘Economics of natural disasters’.…”

Shaking up the Firm Survival: Evidence from Yogyakarta (Indonesia)

“…Focusing on local firm behavior after a natural shock is important since the effects of natural disasters are typically geographically concentrated (Barone and Mocetti 2014) and quite significant in terms of their intensity and extent (Okuyama 2017). This is in line with Rose (2017), who argues that the resilience of regional economies can be threatened by shocks.…”

“…Meanwhile, Okuyama (2017) indicates that the analysis of disaster impacts must focus on the regional level since the economic impacts of disasters can become quite substantial both in their intensity and extent at this level. Also, firm-level data allow the detection of how local conditions interact with shocks (Barone and Mocetti 2014). Therefore, our study contributes to this empirical literature on the impact of natural disasters on firm survival, specifically in developing countries.…”

Urban redevelopment and residential location choice: Evidence from a major earthquake in Japan

“…We now formally examine the mechanism of the observed spatial reorganization in the affected area by controlling for a body of confounding factors. To construct a credible control group, we adopt the SC method to test the impact of the earthquake using a comparative analysis, which was developed by Abadie and Gardeazabal () and Abadie, Diamond, and Hainmueller (), and later adopted by a stream of empirical studies, such as Cavallo, Galiani, Noy, and Pantano (), Barone and Mocetti (), and Ando (). The approach aims to construct an SC unit of a treated unit using the weighted average of a set of untreated donor units, after which the outcomes of the treated and the SC units are compared with evaluate the impact of the treatment.…”

“…(b) Data for "Affected area" refer to the 22 quake-affected municipalities as defined in Figure 2; data for "Unaffected area (<60 km with Osaka/epicenter)" refer to the unaffected urban municipalities which are <60 km away from core Osaka/epicenter. The population of the affected area in 1994 is 4.3 million, of the unaffected area (<60 km with core Osaka) is 10.9 million, and of the unaffected area (<60 km with epicenter) is 8.0 million Galiani, Noy, and Pantano (2013), Barone and Mocetti (2014), and Ando (2015). The approach aims to construct an SC unit of a treated unit using the weighted average of a set of untreated donor units, after which the outcomes of the treated and the SC units are compared with evaluate the impact of the treatment.…”