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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.

Suggested Citation

  • Matthew A. COLE & Robert J R ELLIOTT & OKUBO Toshihiro & Eric STROBL, 2013. "Natural Disasters and Plant Survival: The impact of the Kobe earthquake," Discussion papers 13063, Research Institute of Economy, Trade and Industry (RIETI).
  • Handle: RePEc:eti:dpaper:13063
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    References listed on IDEAS

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    Cited by:

    1. Uchida, Hirofumi & Miyakawa, Daisuke & Hosono, Kaoru & Ono, Arito & Uchino, Taisuke & Uesugi, Iichiro, 2015. "Financial shocks, bankruptcy, and natural selection," Japan and the World Economy, Elsevier, vol. 36(C), pages 123-135.
    2. Uchida, Hirofumi & Miyakawa, Daisuke & Hosono, Kaoru & Ono, Arito & Uchino, Taisuke & Uesugi, Iichiro, 2013. "Natural Disaster and Natural Selection," Working Paper Series 25, Center for Interfirm Network, Institute of Economic Research, Hitotsubashi University.
    3. Hayakawa, Kazunobu & Matsuura, Toshiyuki & Okubo, Fumihiro, 2015. "Firm-level impacts of natural disasters on production networks: Evidence from a flood in Thailand," Journal of the Japanese and International Economies, Elsevier, vol. 38(C), pages 244-259.
    4. Elliott, Robert J.R. & Strobl, Eric & Sun, Puyang, 2015. "The local impact of typhoons on economic activity in China: A view from outer space," Journal of Urban Economics, Elsevier, pages 50-66.
    5. Matthew A. COLE & Robert J R ELLIOTT & OKUBO Toshihiro & Eric STROBL, 2015. "The Effectiveness of Pre-Disaster Planning and Post-Disaster Aid: Examining the impact on plants of the Great East Japan Earthquake," Discussion papers 15097, Research Institute of Economy, Trade and Industry (RIETI).
    6. Tetsuji Okazaki & Toshihiro Okubo & Eric Strobl, 2017. "Creative Destruction of Industries: Yokohama City in the Great Kanto Earthquake, 1923," Keio-IES Discussion Paper Series 2017-021, Institute for Economics Studies, Keio University.
    7. Richard Fabling & Arthur Grimes & Levente Timar, 2014. "Natural Selection: Firm Performance Following the Canterbury Earthquakes," Working Papers 14_08, Motu Economic and Public Policy Research.

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