Natural Selection: Firm Performance Following the Canterbury Earthquakes

Motu Working Paper No. 14-08

54 Pages Posted: 16 Aug 2014

See all articles by Richard Fabling

Richard Fabling

Motu Economic and Public Policy Research Trust

Arthur Grimes

Motu Economic and Public Policy Research Trust

Levente Timar

Motu Economic and Public Policy Research Trust; GNS Science

Date Written: August 14, 2014

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

JEL Classification: D22, L11, Q54

Suggested Citation

Fabling, Richard Blaikie and Grimes, Arthur and Timar, Levente, Natural Selection: Firm Performance Following the Canterbury Earthquakes (August 14, 2014). Motu Working Paper No. 14-08. Available at SSRN: https://ssrn.com/abstract=2480818 or http://dx.doi.org/10.2139/ssrn.2480818

Richard Blaikie Fabling (Contact Author)

Motu Economic and Public Policy Research Trust ( email )

Level 1, 93 Cuba Street
P.O. Box 24390
Wellington, 6142
New Zealand

Arthur Grimes

Motu Economic and Public Policy Research Trust ( email )

19 Milne Terrace
Island Bay
Wellington 6002
New Zealand

Levente Timar

Motu Economic and Public Policy Research Trust ( email )

Level 1, 93 Cuba Street
P.O. Box 24390
Wellington, 6142
New Zealand

GNS Science ( email )

1 Fairway Dr
Avalon
Lower Hutt
New Zealand

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