Earthquake and household energy consumption – Evidence from the Wenchuan earthquake in China

Abstract

In this article, we focus on how household consumption responded to the Wenchuan earthquake in China. Based on the data from 2007, 2008 and 2009 from the China Urban Household Survey, we adopt the difference-in-difference model (DID) and find that the Wenchuan earthquake significantly restrained household consumption. First, the total consumption, energy consumption and energy consumption ratio were suppressed by the Wenchuan earthquake. The negative impact was mainly driven by the “living like there's no tomorrow” effect, and the consumption decisions of the affected households were not always identical. A possible mechanism is salience theory. Second, both the energy consumption ratio and fuel consumption ratio were dramatically reduced by the Wenchuan earthquake. Third, transfer payments helped households mitigate adverse impacts. In addition, households with low education, low income and low social networks were the most strongly affected by the Wenchuan earthquake.