Medium-run local economic effects of a major earthquake

Abstract

Existing research is inconclusive regarding the longer-term economic effects of earthquakes. We examine the medium-run impacts of the 2010 earthquake in Chile, the sixth-largest ever recorded, using value-added tax collection as a proxy for economic activity at the municipal level and a measure of local ground-shaking intensity. We find that the affected municipalities suffered a relevant and persistent drop in their economic activity of about 10%, 8–9 years after the event. We discuss the plausibility of the assumption of conditional parallel trends and show that the overall results are robust to using alternative estimation methods.