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What happened to Kobe? A reassessment of the impact of the 1995 earthquake in Japan

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  • duPont IV, William
  • Noy, Ilan

Abstract

The received wisdom is that the devastation wrought by the 1995 Kobe earthquake did not have any long†term impact on the Japanese economy, nor much impact on Kobe itself. We re†evaluate 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 15 years after the event. Using the methodology developed by Abadie et al. (2010), we construct counter†factual 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 15 years after the quake. GDP per capita in 2007 was 500,000 yen per person lower (13% 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 developed country, and with the backing of a deeppocketed fiscal authority.

Suggested Citation

  • duPont IV, William & Noy, Ilan, 2012. "What happened to Kobe? A reassessment of the impact of the 1995 earthquake in Japan," Working Paper Series 2087, Victoria University of Wellington, School of Economics and Finance.
  • Handle: RePEc:vuw:vuwecf:2087
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    File URL: http://researcharchive.vuw.ac.nz/handle/10063/2087
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    References listed on IDEAS

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    1. Yamamura, Eiji, 2012. "Natural disasters and their long-term effect on happiness: the case of the great Hanshin-Awaji earthquake," MPRA Paper 37505, University Library of Munich, Germany.
    2. 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.
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    8. 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.
    9. Paolo Pinotti, 2012. "The Economic Costs of Organized Crime: Evidence from Southern Italy," Working Papers 054, "Carlo F. Dondena" Centre for Research on Social Dynamics (DONDENA), Università Commerciale Luigi Bocconi.
    10. Yasuyuki Sawada & Satoshi Shimizutani, 2008. "How Do People Cope with Natural Disasters? Evidence from the Great Hanshin-Awaji (Kobe) Earthquake in 1995," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 40(2-3), pages 463-488, March.
    11. Ariel R. Belasen & Solomon W. Polachek, 2009. "How Disasters Affect Local Labor Markets: The Effects of Hurricanes in Florida," Journal of Human Resources, University of Wisconsin Press, vol. 44(1).
    12. Abadie, Alberto & Diamond, Alexis & Hainmueller, Jens, 2010. "Synthetic Control Methods for Comparative Case Studies: Estimating the Effect of California’s Tobacco Control Program," Journal of the American Statistical Association, American Statistical Association, vol. 105(490), pages 493-505.
    13. Oscar Becerra & Eduardo Cavallo & Ilan Noy, 2010. "In the Aftermath of Large Natural Disasters, what happens to foreign aid?," Working Papers 201018, University of Hawaii at Manoa, Department of Economics.
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    Cited by:

    1. Ferman, Bruno & Pinto, Cristine Campos de Xavier & Possebom, Vitor Augusto, 2016. "Cherry picking with synthetic controls," Textos para discussão 420, FGV/EESP - Escola de Economia de São Paulo, Getulio Vargas Foundation (Brazil).
    2. 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.
    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. 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.
    7. 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.
    8. Sawada, Yasuyuki & Takasaki, Yoshito, 2017. "Natural Disaster, Poverty, and Development: An Introduction," World Development, Elsevier, vol. 94(C), pages 2-15.
    9. Craig R. Parsons, 2016. "Disasters and trade: did Hurricane Katrina affect US imports?," International Economics and Economic Policy, Springer, vol. 13(2), pages 177-194, April.
    10. Yasuhide Okuyama, 2016. "Long-Run Effect Of A Disaster: Case Study On The Kobe Earthquake," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 61(01), pages 1-18, March.
    11. Ilan Noy, 2016. "A Global Comprehensive Measure of the Impact of Natural Hazards and Disasters," Global Policy, London School of Economics and Political Science, vol. 7(1), pages 56-65, February.

    More about this item

    Keywords

    Natural disaster; earthquake; Kobe; Great Hanshin; long†run impact;

    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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