Disasters and Housing Infrastructure: Evidence from the 2010 Chilean Earthquake

Abstract

In 2010, a severe earthquake occurred in Chile that brought high-impact destruction effects in the affected areas. It has studied the damage to homes, the determiners of the cost of reconstruction, and how households finance reconstruction using the Casen post-earthquake 2010 panel survey. A probit and an OLS model were used. The results show that houses closest to the epicentre were the most affected, where damage increased when roofs and walls were in worse condition or with more vulnerable materials. The reconstruction costs are related to the degree of destruction, the distance to the epicentre, the condition of the walls before the event and the house’s value. Provinces with more bank branches are associated with a lower cost. Bank credit is more likely to be used to rebuild in urban areas, when the head of the household has more years of education and when the repair cost is higher. Own savings will be used when there is no insurance, the higher the income of the head of household and the lower repair costs. Finally, subsidies will be an option when there is no insurance, the repair cost is higher, and for lower income, age, and education.