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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 IV
  • Ilan Noy

Abstract

The conventional wisdom that the devastation wrought by the 1995 Kobe (Great Hanshin-Awaji) earthquake did not have any long-term impact on the Japanese economy, or much impact on Kobe itself, is wrong. We reevaluate 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 a decade after the event. Using the methodology developed by Abadie et al. (Journal of the American Statistical Association, 2010), we construct counterfactual 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 13 years after the quake. GDP per capita for 2008 was ¥400,000 per person lower (12% 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 high-income country and with the backing of a deep-pocketed fiscal authority.

Suggested Citation

  • William duPont IV & Ilan Noy, 2015. "What Happened to Kobe? A Reassessment of the Impact of the 1995 Earthquake in Japan," Economic Development and Cultural Change, University of Chicago Press, vol. 63(4), pages 777-812.
  • Handle: RePEc:ucp:ecdecc:doi:10.1086/681129
    DOI: 10.1086/681129
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    Cited by:

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    3. Lynham, John & Noy, Ilan & Page, Jonathan, 2017. "The 1960 Tsunami in Hawaii: Long-Term Consequences of a Coastal Disaster," World Development, Elsevier, vol. 94(C), pages 106-118.
    4. Lisa Doyle & Ilan Noy, 2015. "The short-run nationwide macroeconomic effects of the Canterbury earthquakes," New Zealand Economic Papers, Taylor & Francis Journals, vol. 49(2), pages 134-156, August.
    5. Fujiki, Hiroshi & Hsiao, Cheng, 2015. "Disentangling the effects of multiple treatments—Measuring the net economic impact of the 1995 great Hanshin-Awaji earthquake," Journal of Econometrics, Elsevier, vol. 186(1), pages 66-73.
    6. Klomp, Jeroen, 2020. "Do natural disasters affect monetary policy? A quasi-experiment of earthquakes," Journal of Macroeconomics, Elsevier, vol. 64(C).
    7. Yasuhide Okuyama, 2015. "How shaky was the regional economy after the 1995 Kobe earthquake? A multiplicative decomposition analysis of disaster impact," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 55(2), pages 289-312, December.
    8. Koyo Miyoshi & Masaru Sasaki, 2016. "The Long‐Term Impacts of the 1998 Nagano Winter Olympic Games on Economic and Labor Market Outcomes," Asian Economic Policy Review, Japan Center for Economic Research, vol. 11(1), pages 43-65, January.
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    10. Sawada, Yasuyuki & Takasaki, Yoshito, 2017. "Natural Disaster, Poverty, and Development: An Introduction," World Development, Elsevier, vol. 94(C), pages 2-15.
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    More about this item

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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