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What Happened to Kobe? A Reassessment of the Impact of the 1995 Earthquake in Japan

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  • William DuPont

    ()
    (Department of Economics, University of Hawaii at Manoa)

  • Ilan Noy

    ()
    (Department of Economics, University of Hawaii at Manoa)

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Abstract

The received wisdom is that the devastation wrought by the 1995 Kobe earthquake did not have any long-term impact on the Japanese economy, nor much impact on Kobe itself. We re-evaluate the evidence using a new methodology, synthetic control, and find a persistent and still continuing adverse impact of the quake on the economy of Kobe more than 15 years after the event. Using the methodology developed by Abadie et al. (2010), we construct counter-factual dynamics for the Kobe economy. We identify a decline in per capita GDP that is attributable to the quake and is persistent, long-term, and clearly observable even 15 years after the quake. GDP per capita in 2007 was 500,000 yen per person lower (13% decrease) than it would have been had the earthquake not occurred. Importantly, this adverse long-term impact is identified in a wealthy region of a developed country, and with the backing of a deep-pocketed fiscal authority.

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File URL: http://www.economics.hawaii.edu/research/workingpapers/WP_12-4.pdf
File Function: First version, 2012
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Bibliographic Info

Paper provided by University of Hawaii at Manoa, Department of Economics in its series Working Papers with number 201204.

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Length: 25 pages
Date of creation: 19 Mar 2012
Date of revision:
Handle: RePEc:hai:wpaper:201204

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Keywords: Natural disaster; earthquake; Kobe; Great Hanshin; long-run impact;

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  1. Donald R. Davis & David E. Weinstein, 2008. "A Search For Multiple Equilibria In Urban Industrial Structure," Journal of Regional Science, Wiley Blackwell, vol. 48(1), pages 29-65.
  2. Mark Skidmore & Hideki Toya, 2002. "Do Natural Disasters Promote Long-Run Growth?," Economic Inquiry, Western Economic Association International, vol. 40(4), pages 664-687, October.
  3. Strobl, Eric, 2012. "The economic growth impact of natural disasters in developing countries: Evidence from hurricane strikes in the Central American and Caribbean regions," Journal of Development Economics, Elsevier, vol. 97(1), pages 130-141.
  4. Maarten Bosker & Steven Brakman & Harry Garretsen & Marc Schramm, 2005. "Looking for Multiple Equilibria when Geography Matters: German City Growth and the WWII Shock," CESifo Working Paper Series 1553, CESifo Group Munich.
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Cited by:
  1. Hiroshi Fujiki & Cheng Hsiao, 2013. "Disentangling the Effects of Multiple Treatments -Measuring the Net Economic Impact of the 1995 Great Hanshin-Awaji Earthquake," IMES Discussion Paper Series 13-E-03, Institute for Monetary and Economic Studies, Bank of Japan.

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