Agglomeration and Fragility: Firm Responses to the 1923 Great Kanto Earthquake

Tetsuji Okazaki, Toshihiro Okubo and Eric Strobl
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Tetsuji Okazaki: Meiji Gakuin University
Eric Strobl: University of Bern

No 309, Working Papers from European Historical Economics Society (EHES)

Abstract: In this paper we investigate how the disruption of local agglomeration economies affects firm adjustment following a catastrophic urban disaster. To this end we digitalized a unique survey of firms in Tokyo City completed shortly after the earthquake and before any government reconstruction intervention. Using detailed information on the damage experienced by firms and the main good that they produced, as well as where they were located, we construct measures of losses of local agglomeration economies by identifying firms that either permanently ceased operation or relocated elsewhere. To identify causal impacts we exploit plausibly exogenous variation in fire destruction generated by the interaction between fire outbreak locations and local wind direction and speed immediately after the earthquake. Our econometrics results show that a loss of agglomeration economies as a result of the earthquake had a substantial impact on firms shutting down or relocating, with average effects of 13 and 11 per cent for these outcomes, respectively.

Keywords: Agglomeration economies; Natural disasters; Firm relocation; Firm exit; Urban resilience; Great Kanto Earthquake (search for similar items in EconPapers)
JEL-codes: L25 N95 Q54 R11 R12 (search for similar items in EconPapers)
Date: 2026-07
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Persistent link: https://EconPapers.repec.org/RePEc:hes:wpaper:0309

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