Pain of disasters: The educational cost of exogenous shocks evidence from Tangshan Earthquake in 1976

Abstract

Based on a random sample from 1 percent population survey data of 2005, this paper studies the impacts of Tangshan Earthquake on the educational attainment and subsequent labor market outcomes of affected cohorts using the methodology of difference-in-differences model and the local average treatment effect interpretation of instrumental variables technique. We find that the schooling years of the cohorts potentially affected by Tangshan Earthquake is 14%–21% of a year of schooling lower than the non-earthquake cohorts, which can be considered as the shortterm educational cost of Tangshan Earthquake. The rate of returns to years of schooling for the earthquake cohorts is 20.93%–27.85%. The earthquake leads 3.51%–4.77% loss of average income through the reduction of schooling years. A loss of 0.30%–0.41% of GDP in 2005 can be attributed to the lower educational attainment of the earthquake cohorts, which can be considered as the long-term educational cost of Tangshan Earthquake.