Earthquake economics

Destructive as they may be, natural disasters offer nations a window of opportunity to rebuild themselves

Class angle: Natural disasters affect the poor the most. | Photo Credit: AHMAD MASOOD

By Chandan K Jha & Sudipta Sarangi

A little over a month ago, an earthquake of magnitude 7.8 on the Richter scale struck Nepal, causing immense loss of life and property. Aftershocks continued for quite a few days. Although it will not be the same again for many people and places, Nepal is slowly returning to normal. The country is trying to put the earthquake behind and move forward on all fronts.

While there is not a lot of research on earthquakes in economics, our friend Nejat Anbarci at Deakin University and his co-authors have been studying this particular type of natural disaster for some time, and have come up with some fascinating insights.

Natural disasters by themselves are non-discriminatory in nature — they do not engage in statistical or taste-based discrimination. Yet the damage caused by disasters is not identical.