Economic impact of large earthquakes: lessons from residential property values

Abstract Understanding how economic agents respond to seismic shocks in a developing country setting is crucial to evaluating the economic costs of natural disasters. This article makes use of the quasi-random spatial and temporal nature of ground tremors to estimate the economic impact of the April 2015 earthquake on residential property values in Nepal. Regression estimates from the difference-in-differences research design show that residential property values declined by about 40.52 percentage points in areas with high seismic intensity. The event study model illustrates that these negative economic effects are more pronounced between 12 and 24 months after the incidence of the earthquake. Findings further underscore the underlying mechanism of physical damage and indicate that residential properties with weaker outer walls, foundations and roof materials became more susceptible to the earthquake.