Natural Selection: Firm Performance Following the Canterbury Earthquakes

Richard Fabling, Arthur Grimes and Levente Timar

No 14_08, Working Papers from Motu Economic and Public Policy Research

Abstract: The Canterbury earthquakes in September 2010 and February 2011 caused major upheaval to the people of the region. The second quake killed 185 people, forced many from their homes, and closed Christchurch’s central business district. This paper examines the consequential effects on business in the region, paying particular attention to heterogeneity in firm-level outcomes. Consistent with aggregate statistics, we quantify substantial variation in firm outcomes by industry and by location. In addition, we show that firms’ prior financial viability heavily influenced their chance of survival. Conditional on continuing to operate, average profitability returned to pre-quake levels relatively quickly, albeit subject to reduced inputs. Taken together, these effects support economic models where firm exit is driven by selection on profitability.

Keywords: Natural disasters; business survival; response to shocks; difference-in-difference (search for similar items in EconPapers)
JEL-codes: D22 L11 Q54 (search for similar items in EconPapers)
Pages: 54 pages
Date: 2014-08
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:mtu:wpaper:14_08

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