Unveiling employment transition and economic performance: A case study of post-disaster recovery in Canterbury, New Zealand

Abstract

Large-scale events such as disasters, wars and pandemics disrupt the economy by diverging resource allocation, which could alter employment growth within the economy during recovery. Disasters are often followed by a large-scale stimulus to support the economy through the built environment, which can last years. The literature on the disaster–economic nexus predominantly considers the economy's aggregate performance, including the stimulus injection. Few studies have so far aimed to quantify the performance of the underlying economy. This research assesses the employment transition following a disaster by removing this stimulus injection and evaluating the economy's performance during recovery. Canterbury in New Zealand provides a case study of economic transition after an earthquake. Applying the historical construction– economic relationship, a counterfactual level of economic activity is quantified and compared with official results. Using a regional Input–Output model to remove the economy-wide impact from the elevated activity reveals the performance of the underlying economy. The results reveal a strong growing underlying economy, and while convergence was expected as the stimulus slowed down, the results found that growth had already crossed over for some time. Building activity return to a demand-driven level 10 years after the disaster. Employment transition is characterised by two distinct periods. The first five years are stimulus-driven, while the following five are demand-driven. After the initial period of elevated building activity, construction re positioned to its long-term level near 5% of value add. Furthermore, the investment stimulus provides an initial growth buffer from the underlying economy before the growth rates cross over. This study contributes to a growing stream of regional disaster economics research that uses a single case study to assess the economic effect.