Impacts of Earthquakes on Economic Growth and Income Inequality in Independent Turkic States

Abstract

Earthquakes are major natural disasters that occur frequently worldwide. They have several socioeconomic impacts on countries. At first glance, it seems that as if they cause only large volumes of deaths, injuries and destruction. However, in the medium and long run, they cause several other impacts such as income, employment and production losses, increased government expenditures, inflation explosions and income distortions. All of these impacts are critical especially for developing countries that have more vulnerable economies than developed ones. In this respect, this study aims to analyse the impacts of massive earthquakes on economic growth and income inequality in independent Turkic states. With this purpose, two empirical models are estimated by the Generalized Method of Moments (GMM) with panel data covering the period from 1991 – 2022 for 6 countries. Empirical findings exhibit that major earthquakes do not have significant impacts on the economic growth processes of these countries. However, they have significant impacts on income distortions. In this manner, it seems that despite massive earthquakes, Turkic states have been able to sustain their economic growth processes. However, income inequality has increased as a byproduct of these disasters. This evidence seems substantial for sustainable development policy formations of Turkic states.

Keywords

• Earthquakes
• Economic growth
• Income inequality
• Turkic states

References

1. [1] D. H. Meadows, D. L. Meadows, J. Randers, and W. W. III. Behrens. The limits to growth. Universe Books, First Edition, New York, 1972.
2. [2] D. H. Meadows, D. L. Meadows and J. Randers. Beyond the limits. Chelsea Green Publications, First Edition, USA, 1992.
3. [3] M. T. I. Kahn, S. Anwar, S. A. Sarkodie, M. R. Yaseen, and A. M. Nadeem. “Do natural disasters affect economic growth? The role of human capital, foreign direct investment, and infrastructure dynamics”. Heliyon, 9, 1- 19, 2023. https://doi.org/10.1016/J.HELIYON.2023.E12911
4. [4] J. Guo, H. Liu, X. Wu, J. Gu, , S. Song and Y. Tang. “Natural disasters, economic growth and sustainable development in China―an empirical study using provincial panel data”. Sustainability, 7(12), 16783 – 16800, 2015. https://doi.org/10.3390/su71215847
5. [5] O. Sander. “Turkey and the Turkic world”. Central Asian Survey, 13(1), 37 – 44, 1994. https://doi.org/10.1080/02634939408400849
6. [6] Y. Sapiyev. “Turkey and Turkic-speaking states”. Journal of Anadolu Strategy, 3(2), 1 – 31, 2022.
7. [7] A. Penck. “Central Asia”. The Geographical Journal, 76(6), 477 – 487, 1930. https://doi.org/10.2307/1783689
8. [8] M. Mustofaev. “The Organization of Turkic States: A New Approach to Global and Regional Challenges”. Perceptions, 27(1), 105 – 120, 2022.

9. [9] C. R. Jaramillo. “Do natural disasters have long-term effects on growth?” Documento CEDE 2007 – 14, 2007.
10. [10] R. Mechler. “Macroeconomic impacts of natural disasters”. World Bank. 2003 http://info.worldbank.org/etools/docs/library/
11. [11] A. Coburn, and R. Spence. Earthquake protection. John Wiley and Sons. 1992.
12. [12] A. Tokmak, and I. Kara. “Türk devletleri teşkilatı ülkelerinin yurtdışında yerleşik yaşayan vatandaşlarına yönelik uygulamalarının analizi”. MANAS Journal of Social Studies, 12(2), 677 – 690, 2023. https://doi.org/10.33206/mjss.1251578
13. [13] I. Bal. “The Turkish model and the Turkic republics”. New Trends in Turkish Foreign Affairs. Ed. Vedat Yucel and Salomon Ruysdael. Writers Club Press. USA. PP. 211 – 234, 2002.
14. [14] K. Cinar. “Turkey and Turkic nations: a post-cold war analysis of relations”. Turkish Studies, 14(2), 256 – 271, 2013. https://doi.org/10.1080/14683849.2013.802925
15. [15] OTS (Organization of Turkic States). Organization of Turkic States. https://www.turkicstates.org (Accessed 10 November 2023).
16. [16] AFEAD (Active Faults of Eurasia Database) http://neotec.ginras.ru/index/english/database_eng.html (Accessed 08 October 2023).
17. [17] M. Cruse. “Place in Haitian literature since the 2010 earthquake”. Geographical Review, 103(4), 469 – 483, 2013.
18. [18] B. J. Godfrey. “Urban development and redevelopment in San Francisco”. Geographical Review, 87(3), 309-333, 1997.
19. [19] E. Yamamura. “The impact of natural disasters on income inequality: analysis using panel data during the period 1970 to 2004”. International Economic Journal, 29(3), 359 – 374, 2015. https://doi.org/10.1080/10168737.2015.1020323
20. [20] N. V. Loayza, E. Olaberria, J. Rigolini, and L. Christiaensen. “Natural disasters and growth: going beyond the averages”. World Development, 40(7), 1317 – 1336, 2012. https://doi.org/10.1016/j.worlddev.2012.03.002
21. [21] I. Noy. “The macroeconomic consequences of disasters”. Journal of Development Economics, 88, 221 – 231, 2009. https://doi.org/10.1016/j.jdeveco.2008.02.005
22. [22] M. Skidmore, and H. Toya. “Do natural disasters promote long-run growth?” Economic Inquiry, 40(4), 664 – 687, 2002. https://doi.org/10.1093/ei/40.4.664
23. [23] L. Huang, Q. Liu, and Y. Tang. “Long-term economic impact of disasters: evidence from multiple earthquakes in China”. World Development, 174, 106446, 2024. https://doi.org/10.1016/j.worlddev.2023.106446
24. [24] G. M. Idroes, I. Hardi, M. Nasir, E. Gunawan, P. Maulidar, and A. R. R. Maulana. “Natural disasters and economic growth in Indonesia”. Ekonomikalia Journal of Economics, 1(1), 33 – 39, 2023. https://doi.org/10.60084/eje.v1i1.55
25. [25] G. S. Atsalakis, E. Bouri, and F. Pasiouras. “Natural disasters and economic growth: a quantile on quantile approach”. Annual Operations Research, 306, 83–109, 2021. https://doi.org/10.1007/s10479-020-03535-6
26. [26] X. Wu, and J. Guo. “Natural disasters and economic growth―an empirical study using provincial panel data of China”. In: Economic Impacts and Emergency Management of Disasters in China. Springer, Singapore. 2021.
27. [27] R. Best, and P. J. Burke. “Macroeconomic impacts of the 2010 earthquake in Haiti”. Empirical Economics, 56, 1647 – 1681, 2019. https://doi.org/10.1007/s00181-017-1405-4
28. [28] N. Baig, S. Khan, N. G. Gilal, and A. Qayyum. “Do natural disasters cause economic growth? An ARDL bound testing approach”. Studies in Business and Economics, 13(1), 5-20, 2018. https://doi.org/10.2478/sbe-2018-0001
29. [29] Y. T. Hee, K. V. Kalimuthu, L. C. Yu, C. S. Pong, and F. C. Chew. “Do natural disasters affect economic growth in Bangladesh?” International Journal of Business and Society, 19(3), 781 – 792, 2018.
30. [30] S. Lackner. “Earthquakes and economic growth”. FIW Working Paper. No. 190. Pp. 1-61, 2018.
31. [31] R. Zhao, Z. Shihu, and H. Aiping. “Disaster impact, national aid, and economic growth: evidence from the 2008 Wenchuan earthquake”. Sustainability, 10(12), 4409, 2018. https://doi.org/10.3390/su10124409
32. [32] E. Cavallo, S. Galiani, I. Noy, and J. Pantano. “Catastrophic natural disasters and economic growth”. The Review of Economics and Statistics, 95(5), 1549–1561, 2013. https://doi.org/10.1162/REST_a_00413
33. [33] P. S. Fisker. “Earthquakes and economic growth. Institute for Advanced Development Studies”. Development Research Working Paper Series. No: 01/2012.
34. [34] G. Barone, and S. Mocetti. “Natural disasters, growth and institutions: a tale of two earthquakes”. Journal of Urban Economics, 84, 52 – 66, 2014. https://doi.org/10.1016/j.jue.2014.09.002
35. [35] K. J. Thomas, F. B. McDermott, and S. J. T. Richard. “Disasters and development: natural disasters, credit constraints, and economic growth”. Oxford Economic Paper, 66(3), 750–773, 2014. https://doi.org/10.1093/oep/gpt034
36. [36] M. E. Kahn. “The death toll from natural disasters: the role of income, geography, and institutions”. The Review of Economics and Statistics, 87 (2), 271–284, 2005. https://doi.org/10.1162/0034653053970339
37. [37] E. Yamamura. “Impact of natural disasters on income inequality: analysis using panel data during the period 1965 to 2004”. MPRA Paper No. 45623, 2013.
38. [38] N. Anbarci, M. Esceleras, and C. A. Register. “Earthquake fatalities: the interaction of nature and political economy”. Journal of Public Economics, 89, 1907 – 1933, 2005. https://doi.org/10.1016/j.jpubeco.2004.08.002
39. [39] H. Onuma, K. J. Shin, and S. Managi. “Short-, medium-, and long-term growth impacts of catastrophic and non-catastrophic natural disasters”. Economics of Disasters and Climate Change, 5, 53 – 70, 2021. https://doi.org/10.1007/s41885-020-00074-z
40. [40] I. Sahin, and O. Yavuz. “Econometric analysis of natural disasters’ macro-economic impacts: an analysis on selected four OECD countries”. Journal of Business, Economics and Finance, 4(3), 430 – 442, 2015. https://doi.org/10.17261/Pressacademia.2015313064
41. [41] G. Felbermayr, and J. Gröschl. “Naturally negative: the growth effects of natural disasters”. Journal of Development Economics, 111, 92 – 106, 2014. https://doi.org/10.1016/j.jdeveco.2014.07.004
42. [42] N. Benali, and K. Saidi. “A robust analysis of the relationship between natural disasters, electricity and economic growth in 41 countries”. Journal of Economic Development, 42(3), 89 – 100, 2017. https://doi.org/10.35866/CAUJED.2017.42.3.005
43. [43] S. Hochrainer. “Assessing the macroeconomic impacts of natural disasters: are there any?” World Bank Policy Research Working Papers. No. 4968, 2009.
44. [44] T. N. Rasmussen. “Macroeconomic implications of natural disasters in the Caribbean”. IMF Working Paper. No: 04/224, 2004.
45. [45] E. A. Asyahid, and I. S. Pekerti. “Economic impact of natural disasters, spillovers, and role of human development: Case of Indonesia”. Letters in Spatial and Resource Sciences, 15, 493 – 506, 2022. https://doi.org/10.1007/s12076-022-00307-7
46. [46] Y. Okuyama. Disaster and economic growth: theoretical perspectives. In: Okuyama, Y., Rose, A. (eds) Advances in Spatial and Economic Modeling of Disaster Impacts. Advances in Spatial Science. Springer, Cham, 2019.
47. [47] T. C. Zajicek. “The seismic colony: earthquakes, empire and technology in Russian-ruled Turkestan, 1887–1911”. Central Asian Survey, 41(2), 322 – 346, 2021. https://doi.org/10.1080/02634937.2021.1919056
48. [48] R. Umaraliev, R. Moura, H – B. Havenith, F. Almeida, and A. G. Nizamiev. “Disaster risk in central asia: socio-economic vulnerability context and pilot-study of multi-risk assessment in a remote mountain area of the Kyrgyz Republic”. European Journal of Engineering Research and Science, 5(3), 234 – 244, 2020.
49. [49] D. Iakubowskii, N. Komendantova, E. Rovenskaya, D. Krupenev, and D. Boyarkin. “Impacts of earthquakes on energy security in the Eurasian economic union: resilience of the electricity transmission networks in Russia, Kazakhstan, and Kyrgyzstan”. Geosciences, 9(1), 54, 2019. https://doi.org/10.3390/geosciences9010054
50. [50] E. Durukal, and M. Erdik. “Physical and economic losses sustained by the industry in the 1999 Kocaeli, Turkey earthquake”. Natural Hazards, 46, 153 – 178, 2008. https://doi.org/10.1007/s11069-008-9218-6
51. [51] J. P. Elhorst. Spatial panel data models. Handbook of Applied Spatial Analysis: Software Tools, Methods and Applications. M.M. Fischer ve A. Getis (Eds). Springer-Verlag Berlin Heidelberg, 2010.
52. [52] C. Hsiao. “Panel data analysis – advantages and challenges”. Test, 16(1), 1 – 22, 2007. https://doi.org/10.1007/s11749-007-0046-x
53. [53] M. A. Hardy. Regression with dummy variables. Sage Publications. California. USA, 1993.
54. [54] D. B. Suits. “Use of dummy variables in regression equations”. Journal of the American Statistical Association, 52(280), 548 – 551, 1957. https://doi.org/10.1080/01621459.1957.10501412
55. [55] J. Bellaiche. “On the path-dependence of economic growth”. Journal of Mathematical Economics, 46(2), 163 – 178, 2010. https://doi.org/10.1016/j.jmateco.2009.11.002
56. [56] T. Harada. “Path-dependent economic growth with technological trajectory”. Economics of Innovation and New Technology, 19(6), 521 – 538, 2010.
57. [57] A. K. Dutt. Path dependence, equilibrium and economic growth. in Arestis, P., Sawyer,M. (eds): Path Dependency in Macroeconomics. International Papers in Political Economy, Macmillan Palgrave, Houndmills and New York, 2009.
58. [58] EUROSTAT. (2023). Glossary: Gini coefficient. https://ec.europa.eu/eurostat/statistics-explained/index.php?title=Glossary:Gini_coefficient (Accessed 04 October 2023).
59. [59] J. M. Albala-Bertrand. “Natural disaster situations and growth: a macroeconomic model for sudden disaster impacts”. World Development, 21(9), 1417 – 1434, 1993. https://doi.org/10.1016/0305-750X(93)90122-P
60. [60] S. Keerthiratne, and R. S. J. Tol. “Impact of natural disasters on income inequality in Sri Lanka”. World Development, 105, 217 – 230, 2018. https://doi.org/10.1016/j.worlddev.2018.01.001
61. [61] M., Mehrara, and M. Mohammadian. “The determinants of gini coefficient in Iran based on bayesian model averaging”. Hyperion Economic Journal, 1(3), 20 – 28, 2015.
62. [62] E. Abounoori. “Unemployment, inflation and income distribution: A Cross-Country Analysis”. Iranian Economic Review, 8(9), 1 – 11, 2003. https://doi.org/10.22059/IER.2003.30925
63. [63] T. P. Schultz. “Secular trends and cyclical behaviour of income distribution in the United States: 1944 – 1965”. In Six papers on the size distribution of wealth and income. NBER. Pp. 75 – 106, 1967.
64. [64] M. H. Pesaran. “General diagnostic tests for cross section dependence in panels”. Cambridge Working Papers in Economics, 435, 2004.
65. [65] M. H. Pesaran. “A simple panel unit root test in the presence of cross section dependency”. Cambridge Working Papers in Economics, 0346, 2006.
66. [66] M. H. Pesaran. “General diagnostic tests for cross-sectional dependence in panels”. Empirical Economics, 60, 13 – 50, 2021. https://doi.org/10.1007/s00181-020-01875-7
67. [67] T. S. Breusch, and A. R. Pagan. “The lagrange multiplier test and its application to model specifications in econometrics”. Review of Econometric Studies, 47, 239–253, 1980. https://doi.org/10.2307/2297111
68. [68] M. H. Pesaran. “A simple panel unit root test in the presence of cross-section dependence”. Journal of Applied Econometrics, 22, 265 – 312, 2007. https://doi.org/10.1002/jae.951
69. [69] J. A. Hausman. “Specification tests in econometrics”. Econometrica, 46(6), 1251 – 1271, 1978. https://doi.org/10.2307/1913827
70. [70] D. Harris, and L. Matyas. “Introduction to the generalized method of moments estimation. Ed. Laslozo Matyas. Generalized Method of Moments Estimation”. USA: Cambridge University Press, 1999.
71. [71] J. D. Sargan. “The estimation of economic relationships using instrumental variables”. Econometrica, 26, 393 – 415, 1958. https://doi.org/10.2307/1907619
72. [72] C. A. Hidalgo, and R. Hausmann. “The building blocks of economic complexity”. PNAS, 106(26), 10570 – 10575, 2009. https://doi.org/10.1073/pnas.0900943106
73. [73] IMF. https://www.imf.org/en/Publications/WEO/weo-database/2023/April/groups-and- aggregates (Accessed 10 November 2023).
74. [74] EM-DAT. The International Disaster Database. https://public.emdat.be/ (Accessed 04 October 2023).
75. [75] KOERI BOUN (Bogazici University Kandilli Observatory and Earthquake Research Institute). http://www.koeri.boun.edu.tr/new/ (Accessed 11 November 2023).
76. [76] NOAA (National Centres for Environmental Information). https://www.ngdc.noaa.gov/hazard/earthqk.shtml (Accessed 10 November 2023).
77. [77] WDI (World Development Indicators). https://databank.worldbank.org/source/world-development-indicators (Accessed 10 November 2023).