Shaking Up the Equilibrium: Natural Disasters, Immigration and Economic Geography

This paper investigates the effects of a large temporary shock on the agglomeration of economic activity. Using variation in the potential damage intensity of the 1906 San Francisco earthquake across counties in the American West, we find that the earthquake persistently decreased various measures of economic activity, such as population size and total wage expenditures. The main reason for this long-lasting effect is that the earthquake changed the location choice of migrants, who decided to settle in less affected areas of the American West. Our findings suggest that a large temporary shock can have a persistent effect on the location of economic activity.

Keywords: Natural Disasters, Economic Development, Location of Economic Activity, Immigration

JEL Classification: N9, O15, O40, R11, R12

Suggested Citation: Suggested Citation

Ager, Philipp and Hansen, Casper Worm and Hansen, Casper Worm and Lønstrup, Lars, Shaking Up the Equilibrium: Natural Disasters, Immigration and Economic Geography (October 23, 2015). Univ. of Copenhagen Dept. of Economics Discussion Paper No. 15-17, Available at SSRN: https://ssrn.com/abstract=2680089 or http://dx.doi.org/10.2139/ssrn.2680089