Shaky Growth: Chile's earthquake and its effect on GDP. Did the 2010 earthquake change Chile's growth path? Evidence of a synthetic control study

Abstract: This quasi-experimental study analyses the effects of the 2010 Chile earthquake and finds an effect GDP per capita in the years following the event, by using the synthetic control method. After the shock, the country experienced an increase of 7% on GDP per capita on average, an effect which is significant yet only transitory as Chile and its counterfactual catch up again 5 years after the event. These findings are consistent with some economic models yet differ from previous literature on the short run given that the previous macroeconomic and institutional conditions of the country were relatively strong. Furthermore, this opens a new line of study to understand natural disasters and their consequences as I argue that the number of fatalities and magnitude of economic damage are not the only variables affecting the performance of an economy after a disaster occurs.