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The impact of a large-scale natural disaster on local economic activity: evidence from the 2003 Bam earthquake in Iran

Author

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  • Mohammad Reza Farzanegan

    (Philipps-Universität Marburg
    CESifo
    ERF)

  • Sven Fischer

    (Philipps-Universität Marburg)

Abstract

This study provides new causal evidence for the impact of a large-scale natural disaster on local economic activity in Iran using nighttime light intensity. We apply the synthetic control method (SCM) to nighttime light (NTL) data from 1992 to 2013 to study the impact of the 2003 Bam earthquake on Bam County in Iran and its neighboring counties. According to the results and statistical inference tests for the SCM, Bam County and its neighboring counties experienced a statistically significant boost in economic activity in the years following the earthquake. Bam’s GDP economic activity increases by an accumulated US$620 million in the post-earthquake period. We find that the average economic gain in Bam following the 2003 earthquake is approximately 5% of Bam’s GDP. We also discuss possible contributing factors to the post-disaster economic boom in Bam.

Suggested Citation

  • Mohammad Reza Farzanegan & Sven Fischer, 2025. "The impact of a large-scale natural disaster on local economic activity: evidence from the 2003 Bam earthquake in Iran," Empirical Economics, Springer, vol. 68(3), pages 1409-1428, March.
    • Handle: RePEc:spr:empeco:v:68:y:2025:i:3:d:10.1007_s00181-024-02676-y
    DOI: 10.1007/s00181-024-02676-y
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    More about this item

    Keywords

    Natural disaster; Earthquake; Synthetic control; Economic development; Nighttime light; Iran;
    All these keywords.

    JEL classification:

    • H84 - Public Economics - - Miscellaneous Issues - - - Disaster Aid
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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