The impact of natural disasters: how the 2009 earthquake transformed the economy of L’Aquila’s labour market area

Abstract

We investigate the economic impact of the 2009 earthquake in the L’Aquila labour market area (Italy) through a synthetic difference-in-differences method applied to the 2004-2013 period. The shock immediately disrupted the local economy with a 27.3% and 38.2% reduction in employment and the number of firms. However, these effects are not statistically significant when measured 5 years after the earthquake, suggesting that a rebound process affected both dimensions. Such findings are the result of heterogeneous dynamics across the manufacturing and service sectors: the former showed a prolonged contraction in the number of employees and firms, whereas the latter experienced a strong recovery after a short-term negative effect. These dynamics have induced an increase in L’Aquila’s sector dissimilarity from other local labour market areas in Italy.