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Benefit in the wake of disaster: Long-run effects of earthquakes on welfare in rural Indonesia

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  • Gignoux, Jérémie
  • Menéndez, Marta
Abstract
We examine the long-term effects on individual economic outcomes of a set of earthquakes – numerous, large, but mostly not extreme – that occurred in rural Indonesia since 1985. Using longitudinal individual-level data from large-scale household surveys, together with precise measures of local ground tremors obtained from a US Geological Survey database, we identify the effects of earthquakes, exploiting the quasi-random spatial and temporal nature of their distribution. Affected individuals experience short-term economic losses but recover in the medium run (after 2–5 years), and even exhibit income and welfare gains in the long term (6–12 years). The stocks of productive assets, notably in farms, get reconstituted and public infrastructures are improved, seemingly partly through external aid, allowing productivity to recover. These findings tend to discount the presence of poverty traps and exhibit the potential long-term benefits from well-designed post-disaster interventions in contexts where disasters primarily affect physical assets.

Suggested Citation

  • Gignoux, Jérémie & Menéndez, Marta, 2016. "Benefit in the wake of disaster: Long-run effects of earthquakes on welfare in rural Indonesia," Journal of Development Economics, Elsevier, vol. 118(C), pages 26-44.
    • Handle: RePEc:eee:deveco:v:118:y:2016:i:c:p:26-44
    DOI: 10.1016/j.jdeveco.2015.08.004
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    More about this item

    Keywords

    Natural disasters; Earthquakes; Rural Indonesia; Productivity; Welfare; Creative destruction; Poverty traps; Aid and reconstruction;
    All these keywords.

    JEL classification:

    • I30 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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