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Reconstruction following Destruction: Entrepreneurship in the Aftermath of a Natural Disaster

Author

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  • Richard Lombardo
  • Elizabeth Frankenberg
  • Duncan Thomas

Abstract

Little is known about the impact on small-scale enterprises of a large negative shock that destroys assets and disrupts local markets. We document the short- and long-run impacts of the 2004 Indian Ocean tsunami using longitudinal household survey data. We leverage topography-driven variation in exposure to the tsunami in coastal Aceh and North Sumatra, Indonesia. There are large short-run declines in business ownership, real profits, and real business assets among those exposed to the tsunami relative to comparison individuals who were not directly exposed. The gap in ownership rates disappears within two years in the non-agricultural sector but persists for 15 years in the agricultural sector. Profits and business assets of the exposed remain substantially lower through the long-term. Tsunami exposure led to increased short-duration transitions into and out of business ownership. Housing aid is linked to higher rates of non-agricultural business ownership and profits.

Suggested Citation

  • Richard Lombardo & Elizabeth Frankenberg & Duncan Thomas, 2026. "Reconstruction following Destruction: Entrepreneurship in the Aftermath of a Natural Disaster," NBER Working Papers 34839, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:34839
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    More about this item

    JEL classification:

    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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