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The Impact of the 2006 Yogyakarta Earthquake on Local Economic Growth

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Abstract

This paper focuses on the local economic growth impacts of a specific natural disaster, viz. the Yogyakarta earthquake in 2006 employing data at the sub-national level in two provinces in Java, Indonesia. Specifically, we are concerned with the heterogeneity in the response of the various economic sectors to the earthquake, the spatial economic spill-overs from the affected regions to the non-affected districts, and the overall implications of the earthquake on the relative position of the local economies of the affected districts. We find that the earthquake did affect the growth of some sectors in the affected districts, but the shock did not change the (industrial) structure of the local economy. All sectors still had positive growth some years after the earthquake, which indicates the existence of a recovery processes following the shock.

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Notes

  1. These radical political revolutions are the Islamic Iranian revolution after the 1978 earthquake, and the Sandinista revolution a few years after the 1972 earthquake in Managua, Nicaragua (see Cavallo et al. 2013).

  2. Different possible scenarios are discussed in next section. See also Martin (2012) on regional economic resilience.

  3. Klomp and Valckx (2014) use 25 studies (until 1 April 2013), while Lazzaroni and Van Bergeijk (2014) also study the direct effects of disasters (such as damage and fatalities), and build on 34 studies for the indirect effects (income or output) of disasters.

  4. The synthetic control method is a counterfactual approach for comparative analysis. It is proposed by Abadie and Gardeazabal (2003) and Abadie et al. (2010).

  5. For simplification, the term ‘district’ in this paper also includes cities.

  6. Martin (2012) also provides similar scenarios, although he uses the framework of regional resilience.

  7. These data area available at http://data.worldbank.org/data-catalog/indonesia-database-for-policy-and-economic-research.

  8. We use fixed effects to control for the spatial heterogeneity among the districts. This spatial heterogeneity is related to, for instance, the difference in the geographical position (North Coast vs. South Coast, coastal districts vs. inland districts) or in the industrial stage of development (the three biggest economic centres based on GRDP per capita are Kudus, Semarang city, and Surakarta city, see Brata 2009).

  9. We used this formula: LQ s,i,t  = (GRDP s,i,t / GRDP i,t ) / (GRDP r,i,t / GRDP rt ), where s is the sector; i is the district (or local economy); t is the year; and r is the reference area or total Yogyakarta province and Central Java province (40 districts). The result of this formula is also referred to as a coefficient of specialisation. An LQ of 1.0 in manufacturing, for example, means that the district and the province have an equal sector share in mining. An LQ of 1.8 in agriculture means that the district has an 80% higher share in agriculture than the province.

  10. This issue is beyond the scope of this paper.

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Acknowledgements

The authors would like to thank two anonymous reviewers and Editor-in-Chief Prof. Ilan Noy for valuable suggestions and comments. Brata acknowledges a scholarship from the Indonesian Directorate General of Higher Education (DIKTI). The usual disclaimer applies.

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Authors and Affiliations

  1. Department of Economics, Atma Jaya Yogyakarta University, Jl. Babarsari No. 44, Yogyakarta, 55281, Indonesia

    Aloysius Gunadi Brata

  2. Department of Spatial Economics, Vrije Universiteit Amsterdam, De Boelelaan 1105, 1081, Amsterdam, HV, Netherlands

    Henri L. F. de Groot

  3. Tinbergen Institute, Gustav Mahlerplein 117, 1082, Amsterdam, MS, Netherlands

    Henri L. F. de Groot & Wouter Zant

  4. Department of Economics, Vrije Universiteit Amsterdam, De Boelelaan 1105, 1081, HV, Amsterdam, Netherlands

    Wouter Zant

Authors
  1. Aloysius Gunadi Brata
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  2. Henri L. F. de Groot
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  3. Wouter Zant
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Correspondence to Aloysius Gunadi Brata.

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Brata, A.G., de Groot, H.L.F. & Zant, W. The Impact of the 2006 Yogyakarta Earthquake on Local Economic Growth. EconDisCliCha 2, 203–224 (2018). https://doi.org/10.1007/s41885-018-0026-5

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  • DOI: https://doi.org/10.1007/s41885-018-0026-5

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