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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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    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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