Abstract
How disasters have affected economic growth has often been a subject for economic debate, and empirical studies of the experience in China are clearly inadequate. Using the panel data from 181 county-level cities in Sichuan province from 2003 to 2013, this paper investigates the direct and dynamic effects of the Wenchuan earthquake disaster on economic growth, as well as how national rescue affected postdisaster economic recovery. The econometric results show that earthquakes significantly reduce real GDP in the affected areas after controlling for the national rescue variables, and this negative effect exists in the affected area over a long time. In addition, our empirical findings suggest that the postdisaster national rescue can promote economic recovery in the affected areas by increasing government expenditure, improving traffic conditions, and enhancing the urbanization process and the level of industrialization. Besides, state financial aid has no obvious effect on the development of tertiary industries and the accumulation of human capital in affected areas. These results were found to be robust after applying several approaches to alleviate the potential endogeneity problem. Findings in this study carry several important policy implications. As well as providing national rescue to promote postdisaster reconstruction, the government should also develop policies that will provide direct aid funding to tertiary industries and boost postdisaster economic reconstruction and human capital accumulation, thus improving the efficiency of relief funding and reducing the long-term adverse effects of the disaster on economic growth.
Highlights
One of the major challenges facing the world today is how to respond to the impact of disasters from natural hazards on human economic and social development, and the key to meeting this challenge is to correctly understand and assess the long-term impact of disasters on economic growth and social welfare (Klomp, 2016 and Klomp and Valckx, 2014) [1,2]
The results indicate that the earthquake was harmful to current economic growth, and continues to have a significantly negative effect on regional economic growth from a long-term dynamic perspective, thereby supporting the conclusion that disasters from natural hazards have a negative impact on economic growth
We examine the direct impact of the Wenchuan earthquake on economic growth in the affected areas
Summary
One of the major challenges facing the world today is how to respond to the impact of disasters from natural hazards on human economic and social development, and the key to meeting this challenge is to correctly understand and assess the long-term impact of disasters on economic growth and social welfare (Klomp, 2016 and Klomp and Valckx, 2014) [1,2]. The focus of our research is on the Wenchuan earthquake, the worst disaster to occur in China since the introduction of reform and the opening of economic policy This event is studied as a quasi-natural experiment to evaluate its impact on economic growth using the Difference-in-Difference (DID) method. The Chinese national disaster model does help to boost recovery in the affected areas; financial investment in postdisaster reconstruction, as the main objective of national aid, can effectively improve conditions in the disaster area This will promote urbanization and private economic development, reducing government economic intervention and inhibiting excessive investment in fixed assets.
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