The Economic Consequences of a Triple Disaster: A Comparative Case Study of the Great East Japan Earthquake

Abstract: This thesis examines the economic effects of natural disasters by studying the particular case of Tohoku earthquake and tsunami 2011 in Japan. Specifically, the statistical methodology of synthetic controls is used to estimate the change in GDP per capita caused by this incident. In order to determine the causal effect, a synthetic Japan that produces counterfactual outcomes is created with macroeconomic data covering the period 1999-2018. It is found that, contrary to popular belief, the natural disaster did not have a statistically significant negative impact on the Japanese economy. Instead, this paper finds a positive, albeit insignficant influence on GDP per capita. Several channels of influence are discussed and it is suggested that Japan's approach to "build back better" has contributed to its industries' resilience and overall recovery. However, the external validity and applicability of this result is open to question since Japan's disaster management capabilities are highly interlinked with country specific institutions, culture and norms.