Hurricane Iniki: measuring the long-term economic impact of a natural disaster using synthetic control

Abstract

AbstractThe long-term impacts of disasters are ‘hidden’ as it becomes increasingly difficult over time to attribute them to a singular event. We use a synthetic control methodology, formalized in Abadie, A.et al.(2010), Synthetic control methods for comparative case studies: estimating the effect of California's tobacco control program,Journal of the American Statistical Association105(490): 493–505, to estimate the long-term impacts of a 1992 hurricane on the Hawaiian island of Kauai. Hurricane Iniki, the strongest storm to hit Hawaii in many years, wrought an estimated US$ 7.4 billion (2008) in direct damages. Since the unaffected Hawaiian Islands provide a control group, the case of Iniki is uniquely suited to provide insight into the long-term impact of natural disasters. We show that Kauai's economy has yet to recover, 18 years after this event. We estimate the island's current population to be 12 per cent smaller than it would have been had the hurricane not occurred. Similarly, aggregate personal income and the number of private sector jobs are proportionally lower.