Economic and Demographic Effects of Infrastructure Reconstruction After a Natural Disaster

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2018

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In this dissertation I study the long-term effects of post-disaster reconstruction of infrastructure on economic and demographic outcomes. The effects on individuals and communities that result from shocks to existing infrastructure have not been widely explored in the economic and development literature. As some of the largest natural disasters in recent times have shown, massive destruction of infrastructure is followed by large influxes of resources aimed at the reconstruction of damaged property. For example, after the 2004 Indian Ocean tsunami, Indonesia alone received enough aid to deal with the estimated seven billion dollars in infrastructure losses. While there are studies that address how money was allocated, there is hardly any good empirical evidence that provides a causal estimate of the effect that large reconstruction programs have on targeted beneficiaries. In this dissertation I address this gap in the literature.

The context of my study is the 2004 Indian Ocean tsunami, one of the most devastating natural disasters in recent years. In particular, the location for this analysis is the Indonesian province of Aceh, which was the area hardest hit by the disaster (Chapter 2). One of the main reasons why long-term impacts of post-disaster reconstruction remain an understudied topic is the lack of access to data that tracks individuals over time and across space. Having longitudinal data of this type provides a more complete picture of beneficiaries of post-disaster aid, as well as the effects of reconstruction programs on economic outcomes and demographic processes, such as migration. My dissertation addresses this concern by using a unique, population representative panel of survivors of the Indian Ocean tsunami, the Study of the Tsunami Aftermath and Recovery (STAR), which collected extensive individual, household, and community data in Aceh, Indonesia, every year between 2005 and 2010, with an additional follow-up in 2015 (Chapter 3).

Using these data, the first question I explore empirically is an estimation of the causal effects of reconstruction of the housing stock on a multidimensional set of well-being measures (Chapter 4). First, I show that post-tsunami reconstruction was largely determined by the level of damage, regardless of pre-tsunami characteristics of communities, households, and individuals. Based on this finding, I identify the causal effects of housing reconstruction on post-disaster well-being using an individual fixed effects strategy. I show that housing reconstruction causes significant reductions in levels of post-traumatic stress reactivity, and significant increases in socioeconomic well-being. These effects are mainly concentrated after two years of housing tenure, and among those from highly damaged communities. Housing reconstruction has a positive relationship with self-rated physical health (although these estimates are not statistically significant). These results provide important causal evidence of how reconstruction of infrastructure after a natural disaster can have long-lasting, positive consequences for the recovery of survivors.

Next, I continue looking at the effects of rebuilding individual assets (i.e. the home) but turn to the analysis of migration, a key demographic process following natural disasters. Specifically, I look at migration and its relationship with housing reconstruction and well-being (Chapter 5). The 2004 Indian Ocean tsunami displaced large numbers of people. In Aceh, Indonesia, an estimated 500,000 people left their communities after the disaster. In this research, we provide a demographic perspective on displacement and longer-term adaptation and recovery after a disaster. We describe patterns of mobility among tsunami survivors, including those who did not return to their origin communities, those who did return, and those who never left. We also consider mobility among those living in communities that did not suffer tsunami damage. We then examine how the likelihood of receiving housing aid varies across these subgroups. Finally, we consider how measures of subjective well-being evolve after the disaster. Results show that predictors of relocation vary significantly across individuals depending on the level of exposure of communities to the physical damage of the tsunami. Relocation decisions, and in particular staying in the pre-tsunami community, are highly related to the likelihood of benefiting from housing aid. And, changes in subjective well-being not only depend on receipt of housing aid but also on interactions between relocation decisions.

The last empirical analysis changes the focus from the reconstruction of individual assets to the reconstruction of community infrastructure (Chapter 6}), an important component of post-disaster rebuilding programs. In the aftermath of the tsunami, it is estimated that a total of 2,600 km of roads and 119 bridges needed rebuilding. In less than four years a total of 3,700 km of roads and all the destroyed (or damaged) bridges had been rebuilt \citep{indonesia2010provincial}. Roads can be an important gateway to economic development, so in this analysis I focus on estimating the economic effects of road reconstruction in post-tsunami Aceh. First, I exploit variation in timing of road reconstruction projects at the community level and, using a fixed effects strategy, I show that road reconstruction may not be enough to cause significant economic effects, but that quality of road construction matters, specifically access to all-weather roads. Further, I also show that road reconstruction that happens in combination with public works programs has additional positive effects. I provide further evidence on the effects of road reconstruction by looking at the specific case of the reconstruction of the Banda Aceh-Meulaboh road. The Banda Aceh-Meulaboh road is a good example of a project that seeks to restore large public infrastructure after a major shock to the built environment under the assumption that it would contribute to restore economic activity in the area. Using a difference-in-differences strategy, I exploit changes in access to the road between 2005 and 2015. I show that gaining access to the road has positive and modest effects both on individuals and households and, in particular, on households in rural areas. I did not find any statistically significant negative effects of losing access to the road but results from this case study point that losing access may be hindering some progress, for example, to translate work opportunities into higher wages.

Taken together, results from the empirical analyses in this dissertation fill an important gap in our understanding of what happens to disaster victims in the long-run, how they benefit from reconstruction programs that rebuild both individual and community assets, and how these programs can have long-lasting consequences on economics and demographic trajectories of populations. As a result, my study not only represents an important contribution to existing literature, but it also underscores the importance of having data collection projects that account for the long-term nature of infrastructure reconstruction projects. Natural disasters are projected to become increasingly more common, and this type of data can result in empirical research, like this dissertation, that can improve our understanding of how disaster victims cope, which strategies work best and why, and create lessons that can inform disaster management and reconstruction policies that will result in successful post-disaster experiences.

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Laurito, Maria Marta (2018). Economic and Demographic Effects of Infrastructure Reconstruction After a Natural Disaster. Dissertation, Duke University. Retrieved from https://hdl.handle.net/10161/16889.

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