IDEAS home Printed from https://ideas.repec.org/p/keo/dpaper/2020-006.html
   My bibliography  Save this paper

Natural Disasters and Industrial Production Efficiency: Evidence from Prewar Japan

Author

Listed:
  • Preeya Mohan

    (Sir Arthur Lewis Institute of Social and Economic Studies, The University of the West Indies)

  • Toshihiro Okubo

    (Faculty of Economics, Keio University)

  • Eric Strobl

    (Department of Economics, Bern University)

Abstract

In this paper, we investigate whether destruction due to natural disasters induces industries to increase their production efficiency using the case of prewar Japan, a period of frequent disasters and technological upgrading. To this end, we compile a regional sectoral data set of natural disaster destruction and production for machinery and textiles during the period. We then employ a stochastic frontier analysis (SFA) approach to estimate the role of disaster events on changes in production efficiency. Our results show that earthquakes led to increases in efficiency for both machinery and textiles, although they were substantially greater for textiles due to recovery persisting longer. In contrast, climate-related natural disaster events played no role in production efficiency.

Suggested Citation

  • Preeya Mohan & Toshihiro Okubo & Eric Strobl, 2020. "Natural Disasters and Industrial Production Efficiency: Evidence from Prewar Japan," Keio-IES Discussion Paper Series 2020-006, Institute for Economics Studies, Keio University.
    • Handle: RePEc:keo:dpaper:2020-006
    as

    Download full text from publisher

    File URL: https://ies.keio.ac.jp/upload/pdf/en/DP2020-006.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Okazaki, Tetsuji & Okubo, Toshihiro & Strobl, Eric, 2019. "Creative Destruction of Industries: Yokohama City in the Great Kanto Earthquake, 1923," The Journal of Economic History, Cambridge University Press, vol. 79(1), pages 1-31, March.
    2. Wadud, Md. Abdul., 2003. "Technical, Allocative, and economic efficiency of farms in Bangladesh: a stochastic frontier and DEA approach," Journal of Developing Areas, Tennessee State University, College of Business, vol. 37(1), pages 109-126, September.
    3. Eduardo Cavallo & Ilan Noy, 2009. "The Economics of Natural Disasters - A Survey," Working Papers 200919, University of Hawaii at Manoa, Department of Economics.
    4. W J Wouter Botzen & Olivier Deschenes & Mark Sanders, 2019. "The Economic Impacts of Natural Disasters: A Review of Models and Empirical Studies," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 13(2), pages 167-188.
    5. Imaizumi, Asuka & Ito, Kaori & Okazaki, Tetsuji, 2016. "Impact of natural disasters on industrial agglomeration: The case of the Great Kantō Earthquake in 1923," Explorations in Economic History, Elsevier, vol. 60(C), pages 52-68.
    6. Pelli, Martino & Tschopp, Jeanne, 2017. "Comparative advantage, capital destruction, and hurricanes," Journal of International Economics, Elsevier, vol. 108(C), pages 315-337.
    7. Matthew A Cole & Robert J R Elliott & Toshihiro Okubo & Eric Strobl, 2019. "Natural disasters and spatial heterogeneity in damages: the birth, life and death of manufacturing plants," Journal of Economic Geography, Oxford University Press, vol. 19(2), pages 373-408.
    8. Akihiro Otsuka & Mika Goto, 2015. "Regional Policy and the Productive Efficiency of Japanese Industries," Regional Studies, Taylor & Francis Journals, vol. 49(4), pages 518-531, April.
    9. Noy, Ilan & duPont IV, William, 2018. "The Long-Term Consequences of Disasters: What Do We Know, and What We Still Don't," International Review of Environmental and Resource Economics, now publishers, vol. 12(4), pages 325-354, December.
    10. Caves, Richard E., 1989. "Mergers, takeovers, and economic efficiency : Foresight vs. hindsight," International Journal of Industrial Organization, Elsevier, vol. 7(1), pages 151-174, March.
    11. Donald R. Davis & David E. Weinstein, 2002. "Bones, Bombs, and Break Points: The Geography of Economic Activity," American Economic Review, American Economic Association, vol. 92(5), pages 1269-1289, December.
    12. Akihiro Otsuka & Mika Goto & Toshiyuki Sueyoshi, 2010. "Industrial agglomeration effects in Japan: Productive efficiency, market access, and public fiscal transfer," Papers in Regional Science, Wiley Blackwell, vol. 89(4), pages 819-840, November.
    13. Cavallo, Eduardo & Noy, Ilan, 2011. "Natural Disasters and the Economy — A Survey," International Review of Environmental and Resource Economics, now publishers, vol. 5(1), pages 63-102, May.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Matteo Coronese & Davide Luzzati, 2022. "Economic impacts of natural hazards and complexity science: a critical review," LEM Papers Series 2022/13, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    2. Hayato Kato & Toshihiro Okubo, 2022. "The Resilience of FDI to Natural Disasters Through Industrial Linkages," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 82(1), pages 177-225, May.
    3. Ilan Noy & Eric Strobl, 2023. "Creatively Destructive Hurricanes: Do Disasters Spark Innovation?," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 84(1), pages 1-17, January.
    4. Ferreira, Susana, 2024. "Extreme Weather Events and Climate Change: Economic Impacts and Adaptation Policies," IZA Discussion Papers 16715, Institute of Labor Economics (IZA).
    5. Pauline AVRIL & Grégory LEVIEUGE & Camélia TURCU, 2021. "Natural Disasters and Financial Stress: Can Macroprudential Regulation Tame Green Swans?," LEO Working Papers / DR LEO 2913, Orleans Economics Laboratory / Laboratoire d'Economie d'Orleans (LEO), University of Orleans.
    6. Yonson, Rio & Noy, Ilan & Ivory, Vivienne C. & Bowie, Chris, 2020. "Earthquake-induced transportation disruption and economic performance: The experience of Christchurch, New Zealand," Journal of Transport Geography, Elsevier, vol. 88(C).
    7. Eduardo Cavallo & Bridget Hoffmann & Ilan Noy, 2023. "Disasters and Climate Change in Latin America and the Caribbean: An Introduction to the Special Issue," Economics of Disasters and Climate Change, Springer, vol. 7(2), pages 135-145, July.
    8. Takuro Ashizawa & Nao Sudo & Hiroki Yamamoto, 2022. "How Do Floods Affect the Economy? An Empirical Analysis using Japanese Flood Data," Bank of Japan Working Paper Series 22-E-6, Bank of Japan.
    9. Mensah, Edouard R. & Filipski, Mateusz J., 2022. "Saving for a rainy day: the impact of natural disasters on savings rates," 2022 Annual Meeting, July 31-August 2, Anaheim, California 322266, Agricultural and Applied Economics Association.
    10. De Juan Fernández, Aránzazu & Poncela, Pilar & Rodríguez Caballero, Carlos Vladimir, 2022. "Economic activity and climate change," DES - Working Papers. Statistics and Econometrics. WS 35044, Universidad Carlos III de Madrid. Departamento de Estadística.
    11. Horvath, Roman, 2021. "Natural catastrophes and financial depth: An empirical analysis," Journal of Financial Stability, Elsevier, vol. 53(C).
    12. Bashar, Omar & Mallick, Debdulal, 2021. "Frequency of Shocks, Resilience and Shock Persistence: Evidence from Natural Disasters," MPRA Paper 107517, University Library of Munich, Germany.
    13. Toshihiro Okubo & Eric Strobl, 2021. "Natural disasters, firm survival, and growth: Evidence from the Ise Bay Typhoon, Japan," Journal of Regional Science, Wiley Blackwell, vol. 61(5), pages 944-970, November.
    14. Tetsuji Okazaki & Toshihiro Okubo & Eric Strobl, 2020. "The Bright and Dark Side of Financial Support from Local and Central Banks after a Natural Disaster: Evidence from the Great Kanto Earthquake, 1923 Japan," Keio-IES Discussion Paper Series 2020-001, Institute for Economics Studies, Keio University.
    15. Roman Horvath, 2020. "Natural Catastrophes and Financial Development: An Empirical Analysis," Working Papers IES 2020/14, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised May 2020.
    16. Barone, Guglielmo & Mocetti, Sauro, 2014. "Natural disasters, growth and institutions: A tale of two earthquakes," Journal of Urban Economics, Elsevier, vol. 84(C), pages 52-66.
    17. Fujin Zhou & Wouter Botzen, 2021. "Firm Level Evidence of Disaster Impacts on Growth in Vietnam," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 79(2), pages 277-322, June.
    18. Stefan Hochrainer-Stigler & Qinhan Zhu & Alessio Ciullo & Jonas Peisker & Bart Hurk, 2023. "Differential Fiscal Performances of Plausible Disaster Events: A Storyline Approach for the Caribbean and Central American Governments under CCRIF," Economics of Disasters and Climate Change, Springer, vol. 7(2), pages 209-229, July.
    19. Siodla, James, 2021. "Firms, fires, and firebreaks: The impact of the 1906 San Francisco disaster on business agglomeration," Regional Science and Urban Economics, Elsevier, vol. 88(C).
    20. Rio Yonson & Ilan Noy & JC Gaillard, 2018. "The measurement of disaster risk: An example from tropical cyclones in the Philippines," Review of Development Economics, Wiley Blackwell, vol. 22(2), pages 736-765, May.

    More about this item

    Keywords

    Stochastic Frontier Analysis (SFA); Natural Disasters; Production Efficiency; Earthquakes; Inefficiency Scores;
    All these keywords.

    JEL classification:

    • 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
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:keo:dpaper:2020-006. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Institute for Economics Studies, Keio University (email available below). General contact details of provider: https://edirc.repec.org/data/iekeijp.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.