Long-term economic impact of disasters: Evidence from multiple earthquakes in China

This paper examines the short-term and long-term economic impacts of relative-ly small but more frequent earthquakes in China. Using a difference-in-differences approach based on prefecture-level city panel data, combined with a unique data set on seismic events in China, we find that both moderate and strong earthquakes significantly decrease affected prefectures' GDP per capita in the long run. These effects vary depending on the level of local government fiscal autonomy, social capital intensity, and infrastructure development. We also find that three mechanisms contribute to long-term negative effects: the household savings rate, fixed asset investment, and innovation. Our results provide new insights for policymakers to address relatively small disasters, which can have a significant impact on the local economy in the long run.

Automated summary

This study examines the economic impacts of relatively small but frequent earthquakes in China in both the short-term and long-term. The findings suggest that moderate and strong earthquakes significantly decrease GDP per capita in the affected areas in the long run. The effects vary depending on fiscal autonomy, social capital intensity, and infrastructure development. Additionally, the study identifies three mechanisms contributing to the long-term negative effects.