Earthquakes and Economic Growth

ABSTRACT:

This study explores the economic consequences of earthquakes. In particular, it is investigated how exposure to earthquakes afects economic growth both across and within countries. The key result of the empirical analysis is that while there are no observable efects at the country level, earthquake exposure signicantly decreases 5-year economic growth at the local level. Areas at lower stages of economic development sufer harder in terms of economic growth than richer areas. In addition, the analysis proposes an explanation to the paradox that there is a pronounced negative efect at the regional level while no efect appears at the country level. To this end, the efects of earthquake exposure is investigated not only for the impact zones, but also for areas with an average distance to the epicenter of around 100 km. The results indicate that the decrease in production in one part of a country is (partially) of-set by an increase in production in the surrounding regions.

 

Working Paper N° 01/2012

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