Natural disasters and spatial heterogeneity in damages: The birth, life and death of manufacturing plants

Matthew A. Cole, Robert J.R. Elliott, Toshihiro Okubo, Eric Strobl

Research output: Contribution to journalArticle

2 Citations (Scopus)

Abstract

In this paper, we use the 1995 Kobe earthquake as a natural experiment to examine the impact of a large exogenous physical shock on local economic activity. For the first time we are able to control for local spatial heterogeneity in the damage caused by a natural disaster using geo-coded plant location and unique building-level surveys. In a survival analysis of manufacturing plants, our results show that building-level damage significantly affects a plant's likelihood of failure and this effect persists for up to 7 years. Further analysis demonstrates that the plants most likely to exit as a result of earthquake damage are the least productive which is suggestive of a cleansing effect as the average productivity rate of the remaining plants increases. We also find that continuing plants experience a temporary increase in productivity following the earthquake consistent with a 'build back better' effect. In terms of local regeneration our results indicate that plant births increase in areas with more severe damage consistent with redevelopment plans for Kobe.

Original languageEnglish
Pages (from-to)373-408
Number of pages36
JournalJournal of Economic Geography
Volume19
Issue number2
DOIs
Publication statusPublished - 2019 Mar 1

Keywords

  • Earthquake
  • natural disaster
  • productivity
  • survival analysis

ASJC Scopus subject areas

  • Geography, Planning and Development
  • Economics and Econometrics

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