Long-Term Recovery After a Disaster: International Comparisons Ilan Noy EQC-MPI Chair in the Economics of Disasters Professor of Economics Victoria Business School

The build-back back-better better tale

The Vision At CDC we remain fully focused on our vision that in 2031 Christchurch is recognised as the best place for business, work, study and living in Australasia. Tom Hooper, CEO, Canterbury Development Corporation (from the Canterbury Report, Autumn 2014, p. 3)

Good comparisons? Galveston, TX 1900 San Francisco 1906 Messina 1908 Tokyo 1923 Kobe 1995 New Orleans 2005 Smaller places? (Napier?)

Kobe: What Happened?

Kobe s decline (per capita income) 4.5 4 3.5 3 2.5 Hyogo Synthetic Hyogo 2 1.5 1 1976 1981 1986 1991 1996 2001 2006

Looking at Kobe s wards and towns Example results: Population for Nishinomiya 1.2 115 1.15 1.1 105 1.05 1 095 0.95 0.9 Synthetic Nishinomiya 0.85 0.8 1980 1985 1990 1995 2000 2005 2010

Kobe: Population (% deviations from synthetic counterfactual)

Kobe: Taxable Income (% deviations from synthetic counterfactual)

Kobe: Unemployed (% deviations from synthetic counterfactual)

Conclusions about Kobe s EQ impact Long ong-run negative impact on Kobe s economy Population and income are all below the counterfactual, while the number of unemployed is above. This varies by Wards: The central and most devastated wards were negatively affected. Those less devastated, or near Osaka were not affected, or even benefited. This despite of a massive government investment and a quick reconstruction period.

Other cases? Dustbowl Katrina Hilo tsunami Man made events?

What s happening in Canterbury?

Any warning signs?

The cost of rebuilding %GDP %GDP 2.0 June 2011 1.8 Dec 2011 1.6 June 2012 1.4 Dec 2012 12 1.2 June 2013 1.0 0.8 0.6 0.4 0.2 0.0 10 11 12 13 14 15 16 2.0 1.8 1.6 1.4 12 1.2 1.0 0.8 0.6 0.4 0.2 0.0

Insurance

Legal Complications

Population - Canterbury Females Males -4,000-3,000-2,000-1,000 0 1,000 2,000 3,000 4,000 5,000

Business migration - Canterbury

More recent warning signs? The commercial rebuilding in the CBD area has slowed down recently. Volume of building consents is increasing, but fairly slowly. Residential housing pressures are mounting. Very low unemployment rate without corresponding increase in migration. University in trouble.

Why hurry? What can prevent a bad outcome? Speed Post-reconstruction employment A functioning CBD What can speed up the rebuild? Insurance The courts

Central vs. Local Gov t

The bigger picture? Cavallo et al. (2013): No long-run adverse impact of catastrophic natural disasters on national GDP. Do we care about Christchurch? h h?

Two more observations

MY BIBLIOGRAPHY Cavallo & Noy (2011). Natural disasters and the economy A Survey. International Review of Environmental and Resource Economics. Cavallo, Galiani, Noy & Pantano (2013). Catastrophic Natural Disasters and Economic Growth. Review of Economics and Statistics. Coffman & Noy (2012). Hurricane Iniki: Measuring the Long-Term Economic Impact of a Natural Disaster Using Synthetic Control. Environment and Development Economics. dupont, Yokohama, Noy, & Sawada (2014). The (Non) Recovery of Kobe. Working paper. dupont & Noy (2014). What happened to Kobe? A reassessment of the impact of the 1995 earthquake. Economic Development and Cultural l Change. Lynham, Noy & Page (2013). The 1960 Tsunami in Hawaii: Long Term Consequences of a Coastal Disaster. Working gpaper. p

THANK YOU

The synthetic counterfactual Model: Suppose there is a set of optimal weights(ŵ (w 2,...,ŵ,...,w J 1 1 ) such that J 1 1 wy ˆ 2 j jt Y1 t, t {1, 2,..., T0} j and J 1 wˆ j 2 jz j Z 1

The synthetic counterfactual Model: Then (as shown by Abadie et al. (2010) ): Y J 1 N ˆ 1t jyjt j 2 This suggests using: ˆ as an estimator for J 1 ˆ Y 1t 1 t w j Y 2 j jt 1t

Data City/Town/Ward data for 1980-2010 System of Social and Demographic Statistics of Japan Census Geospatial Information Authority of Japan Ministry of Economy o Trade and Industry Ministry of Internal Affairs and Communications Minis