The Economic Aftermath of the Recent Earthquake in Sendai, Japan

By Ilan Noy

Natural disasters potentially impact severely on economic dynamics — e.g. on production, prices, incomes, and employment — in the post-disaster period.

Over the past 14 months, we have witnessed a spate of very large earthquakes, beginning with the earthquake in Haiti (10/1/2010) — the most destructive natural disaster in modern history (relative to the size of the country’s population: nearly 3% of the national population perished) — and continuing with an exceptionally strong earthquake in Chile (27/2/2010), a very destructive one in New Zealand (22/2/2011), and finally with the devastating tsunami and nuclear crisis generated by the March 11 earthquake which struck the Tohoku region in Northern Japan. Remarkably, the economic impact of this recent spate of catastrophic events is not easy to identify. At the time of writing, even the initial horrific toll of the earthquake/tsunami in Japan has not yet been entirely accounted for, as the nuclear crisis triggered by this event is still unfolding.

Before discussing these impacts, however, I would like to note that the data have shown an increase in the frequency of disasters over time. The most comprehensive and global data set on disasters reveals an almost three-fold increase in the frequency of disasters between the 1970s and the last decade (see figure 1).

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