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Natural Disasters and Plant Survival: The impact of the Kobe earthquake

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  • Matthew A. COLE
  • Robert J R ELLIOTT
  • OKUBO Toshihiro
  • Eric STROBL

Abstract

This paper examines the impact of the 1995 Kobe earthquake on the survival of manufacturing plants and their post-earthquake economic performance. The evidence from macroeconomic studies of the impact of natural disasters on economic growth is mixed with some papers finding a small negative effect while others often finding a positive effect. However, the local effects of disasters are often overlooked. In this paper, we undertake a detailed study of the local effects of the Kobe earthquake. We employ a micro-econometric approach based on carefully geo-coded data on initial plant locations and a building-level survey to measure accurately the damage to the buildings where the plants were located. Including plant and building characteristics as well as district-level variables to control for spatial dependencies, our results show that the greater the level of damage a plant experienced, the lower was its probability of survival. Interestingly, this effect persists for some years, although it diminished over time. Further fixed-effects panel analysis shows evidence of falling total employment and value added associated with earthquake damage. However, we find some evidence of creative destruction with the average plant experiencing a short-run increase in productivity although this advantage disappeared over time.

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Bibliographic Info

Paper provided by Research Institute of Economy, Trade and Industry (RIETI) in its series Discussion papers with number 13063.

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Length: 45 pages
Date of creation: Jul 2013
Date of revision:
Handle: RePEc:eti:dpaper:13063

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Cited by:
  1. Hayakawa, Kazunobu & Matsuura, Toshiyuki & Okubo, Fumihiro, 2014. "Firm-level impacts of natural disasters on production networks : evidence from a flood in Thailand," IDE Discussion Papers 445, Institute of Developing Economies, Japan External Trade Organization(JETRO).

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