Post-earthquake short-run labor income shifts. What happens with the distribution of wages after an earthquake?

Abstract

In this article we explore whether a strong earthquake (Manabí and Esmeraldas provinces, Ecuador, April 16th, 2016) had a distributional effect in labor income. We use survey micro-data and exploit the exogenous nature of the shock with an empirical strategy based on a combination of matching, difference in difference (DID) and quantile regression (QR) methods using three earthquake intensity measures to define our treatment group (Peak Ground Acceleration, PGA; Modified Mercalli Intensity, MMI; Peak Ground Velocity, PGV). We find a short-run distributional effect of the earthquake favorable to the poorest workers in the most seismic areas, with higher growth rates for female workers in the first deciles. Quantile difference in differences (QDID) estimates for matched individuals show increases of approximately 12% in the first decile of labor income and 9.5% in the second one. Our results suggest that some opportunities might arise for lower-paid workers if economic incentives are directed towards the most affected areas.