Impacts of negative shocks on wellbeing and aspirations – Evidence from an earthquake

While the influence of adverse shocks on objective measures of wellbeing has been researched in economics, little evidence exists on the effects of shocks like natural disasters on subjective wellbeing and aspirations. The paper examines the causal links between an adverse shock, the 2006 Yogyakarta earthquake in Indonesia, and a range of subjective wellbeing outcomes and aspirations. We combine a household survey panel dataset along with the ground shaking activity (Modified Mercalli Intensity) recorded by the United States Geological Survey. The panel data comprises of self-reported measures on current wellbeing, aspirations about future wellbeing, quality of life, and happiness before and after the earthquake. The results reveal robust evidence that the disaster led to large and significant reductions in subjective wellbeing (including those related to children) and future aspirations. Using a follow-up round of data, we find that such declines in wellbeing persisted years after the disaster, calling into policy action encompassing both material and emotional wellbeing that is crucial for post-disaster revival.