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The Impact of Earthquakes on Economic Activity: Evidence from Italy

Author

Listed:
  • Francesco Porcelli

    (Business School, University of Exeter, UK)

  • Riccardo Trezzi

    (Faculty of Economics, University of Cambridge, UK)

Abstract

Although earthquakes are large idiosyncratic shocks for affected regions, little is known of their impact on economic activity. Seismic events are rare, the data is crude (the Richter scale measures the magnitude but says nothing of the associated damages) and counterfactuals are often entirely absent. We suggest an innovative identification strategy to address these issues based on the so-called ’Mercalli scale’ ranks - a geophysical methodology devised to gauge seismic damages relying on a newly compiled dataset following 95 Italian provinces from 1986 to 2011 (including 22 seismic episodes) offering an ideal ground for identification. Also, we carry out counterfactuals taking advantage of ex ante identical neighboring provinces that only differ ex post in terms of damages. Contrary to conventional views, we find that the impact of seismic events on output is negligible (or even positive) including after the most devastating events.

Suggested Citation

  • Francesco Porcelli & Riccardo Trezzi, 2014. "The Impact of Earthquakes on Economic Activity: Evidence from Italy," Working papers 7, Società Italiana di Economia Pubblica.
    • Handle: RePEc:ipu:wpaper:7
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    Cited by:

    1. Yu Aoki & Theodore Koutmeridis, 2019. "Shaking Criminal Incentives," Working Papers 2019-13, Business School - Economics, University of Glasgow.
    2. Huang, Ruixian & Shi, Yujing & Li, Danyang & Wang, Shuoxiang & Jia, Zhehao, 2024. "Religious atmosphere, seismic impact, and corporate charitable donations in China," Energy Economics, Elsevier, vol. 131(C).
    3. Maribel Jiménez Martínez & Mónica Jiménez Martínez & Rocío Romero-Jarén, 2020. "How resilient is the labour market against natural disaster? Evaluating the effects from the 2010 earthquake in Chile," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 104(2), pages 1481-1533, November.
    4. Johar, Meliyanni & Johnston, David W. & Shields, Michael A. & Siminski, Peter & Stavrunova, Olena, 2022. "The economic impacts of direct natural disaster exposure," Journal of Economic Behavior & Organization, Elsevier, vol. 196(C), pages 26-39.
    5. Aoki, Yu & Koutmeridis, Theodore, 2019. "Shaking Criminal Incentives," IZA Discussion Papers 12781, Institute of Labor Economics (IZA).
    6. de Blasio, Guido & De Paola, Maria & Poy, Samuele & Scoppa, Vincenzo, 2018. "Risk Aversion and Entrepreneurship: New Evidence Exploiting Exposure to Massive Earthquakes in Italy," IZA Discussion Papers 12057, Institute of Labor Economics (IZA).
    7. Cerqua, A. & Ferrante, C. & Letta, M., 2021. "Electoral Earthquake: Natural Disasters and the Geography of Discontent," GLO Discussion Paper Series 790, Global Labor Organization (GLO).
    8. Guido Blasio & Maria Paola & Samuele Poy & Vincenzo Scoppa, 2021. "Massive earthquakes, risk aversion, and entrepreneurship," Small Business Economics, Springer, vol. 57(1), pages 295-322, June.
    9. Gu, Zheng & Li, Yunxian & Zhang, Minghui & Liu, Yifei, 2023. "Modelling economic losses from earthquakes using regression forests: Application to parametric insurance," Economic Modelling, Elsevier, vol. 125(C).
    10. Cerqua, Augusto & Ferrante, Chiara & Letta, Marco, 2023. "Electoral earthquake: Local shocks and authoritarian voting," European Economic Review, Elsevier, vol. 156(C).
    11. Mohammad Reza Farzanegan & Sven Fischer, 2025. "The impact of a large-scale natural disaster on local economic activity: evidence from the 2003 Bam earthquake in Iran," Empirical Economics, Springer, vol. 68(3), pages 1409-1428, March.
    12. Dhamija, Gaurav & Sen, Gitanjali, 2023. "Lasting impact on health from natural disasters, potential mechanisms and mitigating effects," Environment and Development Economics, Cambridge University Press, vol. 28(1), pages 1-24, February.
    13. Dottori, Davide, 2024. "The effect of the earthquake in Central Italy on the depopulation of the affected territories," Regional Science and Urban Economics, Elsevier, vol. 105(C).
    14. Chiara D’Alpaos & Paolo Bragolusi, 2020. "The Market Price Premium for Buildings Seismic Retrofitting," Sustainability, MDPI, vol. 12(21), pages 1-20, October.
    15. James Feigenbaum & James Lee & Filippo Mezzanotti, 2022. "Capital Destruction and Economic Growth: The Effects of Sherman's March, 1850–1920," American Economic Journal: Applied Economics, American Economic Association, vol. 14(4), pages 301-342, October.

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    Keywords

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    JEL classification:

    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • E00 - Macroeconomics and Monetary Economics - - General - - - General
    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General

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