Labor Shakes: Mid-Run Effects of the 27F Earthquake on Unemployment

Abstract

I exploit the exogenous characteristic of a natural disaster occurred in Chile in order to explain its effects on general unemployment over affected and unaffected regions of the country in a mid-run timespan of 5 measured years. By using a fixed effect panel data regression model, I find that regions closer to the epicentre of the 27F earthquake showed significantly deeper reductions of unemployment over the time in comparison to those regions which are further from the epicentre. This effect was not observed in a significant way when using a short-run subsample of two years. I also perform diverse robustness checks over the estimates, all of which strongly support these findings. Thus, I conclude that more affected regions received a prime on unemployment reduction in the mid-run lapse of these four years after the earthquake.