This essay provides an comprehensive analysis of the economic impact of earthquakes on the performance of the country`s economy, both in the long and in the short run. Natural disasters are detrimental to the economic growth of the countries that face the disaster. The extent and severity of the effect of natural disasters vary across countries, but, the basic impact is not heterogeneous.
The great Hanshin-Awaji earthquake hit Japan and it had brought tremendous damage to the country in terms of economic growth of the economy and the social structure. The city of Kobe was the worst sufferer in this disaster. Japan was already a developed nation when the disaster had stricken the country. Research by scholars acknowledges that the disaster had caused “devastating damage to the economic landscape of southern-central Japan” But, at the same time the results of investigation show that the earthquake made people realize the fact that capital formation is an important element of economic growth in the country. In the long run, level of well being of the survivors of the disaster depends on the rate at which capital is accumulated in the economy. Research results show that the impact of the disaster fades with time and the rate of development of the economy plays a major role in the standard of living of its people
Although natural disasters are occurring with increasing frequency and are creating potentially devastating impact on the economies that face it, the economic cause of the disaster has not yet been accurately deciphered.
Victims show the tendency to adapt with the new circumstances with the passage of time. A subsequent research shows the result of investigation into “the extent to which the earthquake enhanced the investment in social capital through participation in community activity” (Yamamura, 2013, p. 1). After facing the huge loss to life and property as a result of the earthquake, the people of Japan expressed greater consciousness regarding the importance of social capital. Comparing the data collected between the years 1991 and 1996, it has been found that people were more inclined to make investment in social capital in 1996 than they were in 1991 (Skidmore and Toya, 2002). This significantly increased the rate of investment in social capital by the residents of Kobe. However, rate of investment by the people living in the cities near Kobe did not show any noteworthy change. From this phenomenon the author has inferred that the impact of the disaster decreases with distance; the effect of the disaster is lesser in the minds of the people that stay far away from the origin of disaster (Yamamura, 2010). Although natural disasters are occurring with increasing frequency and are creating potentially devastating impact on the economies that face it, the economic cause of the disaster has not yet been accurately deciphered. There have been several studies on the medium and long term impact of the disasters on the prospects of development of the countries. According to the works by Cavallo, Powell and Becerra (2010) long term effects of natural disasters from the economic point of view are not understood well. In general, literature existing in this sphere of research shows lack of theory and empirical evaluation of the mechanisms that