DO RECONSTRUCTION INVESTMENTS IMPROVE TECHNOLOGICAL PROGRESS IN AN EARTHQUAKE-STRICKEN AREA? EVIDENCE FROM THE WENCHUAN EARTHQUAKE

Abstract

This study identified the impact of a seismic shock on technological progress in earthquake-stricken areas (ESAs) using a synthetic control method. Technological progress was measured using the total factor productivity (TFP) and the TFP growth rate. The ESAs after the Wenchuan Earthquake in China were used as an empirical case study; the Solow residual model was used to assess the TFP and the TFP growth rate in 16 districts. Counter-factual dynamics for the ESAs were constructed to exclude the effect of the macro-economy. The research findings indicate that technological progress in the ESAs after the Wenchuan Earthquake improved as a result of reconstruction investments. However, there were differences in the speed of technological progress between ESAs. These differences may be attributed to the differences in the industrial characteristics between ESAs. The study concludes that the technological progress of the secondary industry, such as the manufacturing industry and building industry, is more resilient. This refers to the capacity to resist economic losses after the seismic shock, compared to the tertiary industry, such as the service industry and tourist industry. However, there was a larger long-term advancement in the technological progress in the tertiary industry compared to the secondary industry after the earthquake. With this understanding, ESA governments can implement appropriate strategies to meet both short-term needs and sustainable economic growth.