Abstract:
Research on the economic and human toll of natural disasters focuses on the short-term, often ignoring the important long-term impacts of these catastrophic events. The main reason for the lack of empirical research on the long-term is the inherent and unavoidable difficulty in identifying any long-term impacts and attributing them to the disaster. On the 23rd of May 1960, a devastating tsunami struck the city of Hilo on the island of Hawaii. Remarkably, there was no significant injury or damage elsewhere in the Hawaiian Islands. This tsunami provides a unique natural experiment as the tsunami was unexpected, and the other Hawaiian Islands, which were not hit by the tsunami, provide an ideal control group that enables us to precisely identify the counter-factual. We use a newly developed synthetic control methodology formalized in Abadie et al. (2010) to measure the long-term impacts of the tsunami. We find that while wages did not decline noticeably, population and employment trends shifted. Fifteen years after the event, unemployment was still 32% higher and population was still 9% lower than it would have been had the tsunami not occurred. We also find a corresponding decrease in the number of employers and sugar production in the county.
