'Natural Disasters and Plant Survival: The Impact of the Kobe Earthquake'

Life and Environmental Sciences, Research
Wednesday 5th February 2014 (16:15-17:15)
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Part of the School Seminar Series

Speaker: Professor Robert Elliott, Dept of Economics, Birmingham

Host: Peter Lee

In recent years, natural disasters from Hurricane Katrina to the Great East Japan Earthquake have grabbed the attention of the public, policymakers and academics.  In this paper we contribute to this relatively new literature and examine the impact of the 1995 Kobe earthquake on the survival of manufacturing plants, their post-earthquake economic performance, and the birth of new plants.  Using geo-coded plant location and unique building-level surveys we are able to identify for the first time the actual damage to the building where each plant was located at the time of the earthquake.  Including plant and building-characteristics as well as district-level variables to control for spatial dependencies, our results show that damaged plants were considerably more likely to fail than undamaged plants and that this effect persisted for up to seven years.  Further analysis shows that surviving plants experienced a reduction in total employment and value added as a result of earthquake damage.  However, we also find some evidence of creative destruction with the average surviving plant experiencing a time limited increase in productivity following the earthquake.  On average, earthquake damage tended to deter plant births, although severe damage in an area appears to have acted as a stimulus to births.

JEL: Q54, R10, R12, D22, L10, L25, M13, C01
Keywords: Earthquake, natural disaster, survival analysis, productivity
Acknowledgements: We would like to thank RIETI for access to the micro-data. We thank Toru Fukushima, Kobe University and Kobe City Office for providing damage maps, residential maps and the buildings data set and Kazuo Fujimoto for providing the shake map.  We also thank the Japanese Construction Engineering Research Institute for providing access to earthquake damage maps.  We are also grateful for comments from participants at seminars in the Grantham Institute at the LSE and GRIPS in Japan.