The long-run socio-economic consequences of a large disaster: The 1995 earthquake in Kobe

We quantify the ‘permanent’ socio-economic impacts of the Great Hanshin-Awaji (Kobe) earthquake in 1995 by employing a large-scale panel dataset of 1,719 cities, towns, and wards from Japan over three decades. In order to estimate the counterfactual—i.e., the Kobe economy without the earthquake—we use the synthetic control method. Three important empirical patterns emerge: First, the population size and especially the average income level in Kobe have been lower than the counterfactual level without the earthquake for over fifteen years, indicating a permanent negative effect of the earthquake. Such a negative impact can be found especially in the central areas which are closer to the epicenter. Second, the surrounding areas experienced some positive permanent impacts in spite of short-run negative effects of the earthquake. Much of this is associated with movement of people to East Kobe, and consequent movement of jobs to the metropolitan center of Osaka, that is located immediately to the East of Kobe. Third, the furthest areas in the vicinity of Kobe seem to have been insulated from the large direct and indirect impacts of the earthquake.