Ten Years After an Earthquake, What is Left? New Evidence on the Destruction and Reconstruction Effects of Natural Disasters on Developing Countries

Abundant empirical evidence in development economics highlights the long-run negative effects of natural disasters or it effects on aggregate economic indicators. By contrast, much less is known about how a disaster-struck... [ view full abstract ]

Abundant empirical evidence in development economics highlights the long-run negative effects of natural disasters or it effects on aggregate economic indicators. By contrast, much less is known about how a disaster-struck household’s socioeconomic welfare is affected, and how they manage to recover in the aftermath. We study the case of an 8.0 moment-magnitude Earthquake in central Peru in 2007, the strongest earthquake in the Pacific Coast since 1900. Using a DiD approach, we exploit fortunately-timed census data in 2005, 2007, and 2012, high-quality annual household surveys and data on public investment projects to document the short-term recovery dynamics in affected areas.

We are able to provide evidence that provides valuable insights on how affected households compensated for the shock by reducing their consumption, shifting their labor supply outwards, while protecting children and teens from negative schooling effects. Although households were eventually able to neutralize most negative income and expenditure effects, recovery patterns were notably unequal, with low-SES households being left out of the recovery process in many dimensions.