Abstract
Since, 2010, New Zealand, Japan and Haiti have suffered from large scale damages as the result of earthquakes. Along with the devastating immediate losses associated with such disasters, particularly the loss of lives, those exposed to such events may in addition suffer from prolonged negative effects on the wider economy.
This thesis examines the economic effects of the Canterbury earthquakes, with a focus on the impacts on the tourism and trade sectors. Specifically, the synthetic control methodology pioneered by Abadie and Gardeazabal (2003) is used to estimate the effects of the earthquakes on regional GDP and its derivatives, tourism and international trade. The effect of the earthquake on tourism is investigated by looking at regional guest nights and regional international flight arrivals, while the effect of the event on trade is investigated through regional gross imports and regional gross exports. The synthetic control methodology is a data driven procedure that uses regions throughout New Zealand to generate a counter-factual which represents the Canterbury region if it were relatively unaffected by the earthquake. The difference between Canterbury and its counter-factual estimates the causal effect of the earthquake events for the region.
The effect of the earthquake on Canterbury’s tourism is significant, while the effects on regional GDP, international arrivals and exports are inconclusive with regards to statistical significance. As at 2012Q4, the average effect of the earthquakes on Canterbury (the difference between Synthetic Canterbury and Treated Canterbury) indicate that regional GDP fell by 4.9% and regional regional guest nights fell by 22.9%. International arrivals fell by 17.7% reductions in imports were seen to be negligible and exports fell by 13.3%. Placebo tests and regression based techniques are used to verify the robustness of these results.