Natural Disasters and Regional Development - the Case of Earthquakes

Abstract

We analyze the impact of earthquakes on nighttime lights at a sub-national level, i.e. on grids of different size. We argue that existing studies on the impact of natural disasters on economic development have several important limitations, both at the level of the outcome variable – usually national income or growth – as well as on the level of the independent variable, e.g. the timing of an event and the measuring of its intensity. We aim to overcome these limitations by using geophysical event data on earthquakes together with satellite nighttime lights. Using panel fixed effects regressions covering the entire world for the period 1992-2013 we find that earthquakes reduce both light growth rates and light levels significantly. The effects are persistent for approximately 5 years, but we find no long run effects. The effects are strong and robust in a small grid and gets weaker the larger the unit of observation. National institutions and economic conditions are relevant mediating factors.