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The Long-term Impact of the 1995 Hanshin-Awaji Earthquake on Wage Distribution

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  • Fumio Ohtake
  • Naoko Okuyama
  • Masaru Sasaki
  • Kengo Yasui

Abstract

This paper explores the effects of the 1995 Hanshin-Awaji Earthquake on the wages of people in the area of the earthquake over the 17 years after its occurrence and identified which part of the wage distribution has been most affected by this event by comparing the wage distributions of disaster victims and non-victims. To do this, we used three decomposition methods, developed by (i) Oaxaca (1973) and Blinder (1973); (ii) DiNardo, Fortin, and Lemieux (1996) (gDFLh); and (iii) Machado and Mata (2005) and Melly (2006). Our findings are as follows. First, the Oaxaca and Blinder decomposition analysis shows that the negative impact of the earthquake still affects the mean wages of male workers. Second, the DFL decomposition analysis shows that middle-wage males would have earned more had the 1995 Hanshin-Awaji Earthquake not occurred. Finally, the Machado-Mata-Melly decomposition analysis shows that the earthquake had a large, adverse impact on the wages of middle-wage males, and that their wages have been reduced since the earthquake, by 5.0-8.6%. This result is similar to that from the DFL decomposition analysis. In the case of female workers, a long-term negative impact of the earthquake was also observed as the wages of high-wage females were reduced by 8.3-13.8%.

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Paper provided by Institute of Social and Economic Research, Osaka University in its series ISER Discussion Paper with number 0897.

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Date of creation: Apr 2014
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Handle: RePEc:dpr:wpaper:0897

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  1. Alan S. Blinder, 1973. "Wage Discrimination: Reduced Form and Structural Estimates," Journal of Human Resources, University of Wisconsin Press, vol. 8(4), pages 436-455.
  2. Eduardo A. Cavallo & Andrew Powell & Oscar Becerra, 2010. "Estimating the Direct Economic Damage of the Earthquake in Haiti," IDB Publications 6781, Inter-American Development Bank.
  3. José Mata & José A. F. Machado, 2005. "Counterfactual decomposition of changes in wage distributions using quantile regression," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 20(4), pages 445-465.
  4. Yasuyuki Sawada & Satoshi Shimizutani, 2008. "How Do People Cope with Natural Disasters? Evidence from the Great Hanshin-Awaji (Kobe) Earthquake in 1995," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 40(2-3), pages 463-488, 03.
  5. Yasuyuki Sawada & Satoshi Shimizutani, 2007. "Consumption insurance against natural disasters: evidence from the Great Hanshin-Awaji (Kobe) earthquake," Applied Economics Letters, Taylor & Francis Journals, vol. 14(4), pages 303-306.
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