Natural disasters and spatial heterogeneity in damages: the birth, life and death of manufacturing plants. (10th November 2017)

• Record Type: Journal Article
• Authors: Cole, Matthew A; Elliott, Robert J R; Okubo, Toshihiro; Strobl, Eric
• Is Part Of: Journal of economic geography. Volume 19:Number 2(2019)
• Page Start: 373
• Page End: 408
• Publication Date: 2017-11-10
• Subjects: Earthquake -- natural disaster -- survival analysis -- productivity; Q54 -- R10 -- R12 -- D22 -- L10 -- L25 -- M13 -- C01; Economic geography -- Periodicals; 330.9
• DOI: 10.1093/jeg/lbx037
• Languages: English
• ISSNs: 1468-2702

Abstract

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.