Poverty | 2021
Labor Market Outcomes During Opposite Resource Shocks: The 2009 and 2012 Earthquakes in Italy
Abstract
The 2009 and 2012 earthquakes in Italy occurred in a close-knit region and time horizon but differed substantially on both the initial shock to the stock and the subsequent flow of resources. This paper considers the short-run impact on the dynamic response of labor market outcomes. Both natural disasters lowered employment and labor force participation by more than 0.5%. With its negative effect on the resources available, the 2009 shock led to a drop in real wages of 1.3% and a sharp - but short-lived - widening of the wage gap generated by the skill premium. The 2012 hazard, which led firms to upgrade their technology, increased wages by 2.2% and led to a more balanced - but persistent - widening of the wage gap. The predictions of a model developed in this paper are consistent with these results.