Well-being Effects of Natural Disasters: Evidence from China’s Wenchuan Earthquake

Abstract

This study finds that the Wenchuan earthquake in 2008, one of China’s most catastrophic earthquakes, substantially decreased victims’ subjective well-being even after incorporating the offsetting effects of post-disaster relief programs. This net well-being impact lasted for nearly 10 years and was on average equivalent to a loss of 67% of the average equivalized household income. Although the post-disaster measures largely restored income, health, and employment, they failed to prevent well-being losses due to family dissolution, as reflected in the higher rates of divorce and widowhood after the earthquake. We find that rural populations, older adults, the less educated, and residents without social insurance were more vulnerable to the earthquake shock. This study uses six waves of a nationally representative dataset of China and a difference-in-differences approach to identify the short- and long-term causal well-being effects of the Wenchuan earthquake. Deeper analyses on mechanisms and heterogeneity suggest that post-disaster policies should focus more on aspects beyond economic factors and on the well-being of disadvantaged populations in particular.