The impacts of natural disasters on plants' growth: Evidence from the Great Hanshin-Awaji (Kobe) earthquake

• There are positive effects of the quake on capital growth.
• There are negative effects of the quake on employment growth.
• There are negative effects of the quake on value added.

This study is the first attempt to examine the impacts of a natural disaster at the plant level, focusing on the Great Hanshin-Awaji (Kobe) earthquake, which occurred in 1995 and affected numerous plants in Kobe city. In this study, I use plant-level data to re-examine the creative disaster hypothesis, which states that natural disasters enhance growth of firms or plants in stricken areas. I employ the matching method together with the difference-in-difference (DID) approach to reveal the quake's effects. While most country and firm-level evidences support the creative disaster hypothesis, this study shows that the plants that survived in Kobe's most devastated districts faced severe negative effects from the quake in terms of employment and value added growth during the subsequent three years.