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The regional consequence of a disaster

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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. David Dyason discusses the employment transition following a disaster by removing this stimulus injection and evaluating the economy’s performance during recovery.

Image courtesy of interviewee. May 22, 2024

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This video video discusses the impact of large-scale disruptive events, such as disasters, pandemics, and wars, on economic activity and societal structures. These events generally have lasting negative effects, forcing economic adjustments that can affect labor, production, and consumption. The focus is on the economic response to disasters, particularly through government stimulus interventions designed to mitigate negative effects.

The case study looks at the Christchurch earthquakes in New Zealand from 2010-2011, highlighting the significant regional damage and the extensive investment required for recovery. The research aims to understand how resource allocation in the labor market changes in response to such disasters and evaluates the effects of stimulus on industry performance.

Key findings indicate that while disasters lead to short-term negative economic impacts, they can also foster positive changes by replacing outdated technology and promoting development opportunities. The construction industry is identified as the primary beneficiary of recovery efforts, seeing an increase in its economic contribution during the rebuilding phase.

The study also emphasizes that the effects of disasters vary by type, location, and industry, noting distinct employment patterns over time. However, the text mentions that understanding how employment transitions occur in recovery periods remains complex and requires further research. The researchers suggest that post-recovery, employment tends to stabilize and the underlying economic performance can return to pre-disaster levels. Future research could explore the effects of other disaster types and their severity on recovery dynamics.

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X-TIMESTAMP-MAP:LOCAL=00:00:00.000,MPEGTS=900000

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Large scale disruptive events, such

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as pandemics, disasters, and wars.

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They tend to have a lasting effect on society,

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and also they force economic activity to adjust.

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Now, disasters not only adjust economic activity,

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but it also affects the way in which economic

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systems function.

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So this is, this is typically of a negative impact,

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and these negative impacts have negative consequences on

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assets, on labor, on production, and as well as consumption.

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Now, as the economy moves away from the equilibrium,

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as a result of these disruptive events disrupt,

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you often get, uncertainty.

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People don't know what to respond, what to expect.

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Um, governments dunno how to respond.

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So therefore, when we, when we look at these kind of events,

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there's value in assessing how the economy respond,

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and especially there's value in understanding

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how the economy through employment transitions

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during this recovery period

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and this period can last quite a long time.

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So in particular, when we look at economic,

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the economic response and,

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and that economic response to disaster, this is often

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through stimulus and a stimulus intervention,

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and that influences the recovery rate.

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So you would have the, the investment

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or the stimulus intervention from government in order

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to mitigate those negative effects of, of the disaster.

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Now, we would think that, you know, when you do invest,

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when you do have these stimulation, interventions,

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that there would be a quick response

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to those negative impacts.

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Um, but the, those impacts are likely also

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to change depending on the type of industries

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or the sectors that are influenced.

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Now, in the case of an earthquake, which is the topic of,

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of this study, it often leads to instant loss

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of infrastructure, not just infrastructure,

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but also human capital.

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And that could take years to replace.

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So within 20 10, 20 11,

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Canterbury in New Zealand had a significant number

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of earthquakes, and it's in a regional basis.

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So the impact of this, of this earthquake was regional.

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It wasn't national.

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Um, but that led to significant number

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or an amount of investment from government,

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not just government, but also insurance to actually rebuild

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the infrastructure that was lost.

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So the city had significant damage.

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Christchurch itself had significant damage within the CBD

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essentially closing it off for two years.

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Beyond the CBD, we had approximately 170,000 properties

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that required repair,

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or improvement as a result of the damage.

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Uh, and, and this amounted to approximately 40 billion.

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The study essentially tries to contribute to

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what we call the growing regional disaster

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economies research.

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We are looking at Canterbury, New Zealand as a case study,

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and we are now trying to determine,

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and assess how resource

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allocation within the labor market,

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particularly the labor market, how that is affected

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as a result of, of these disaster activities and events.

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So several studies have, have been done on, on this nexus

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between the economy and disasters.

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And, and mostly of these studies have found two things.

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The first thing is I found mostly negative economic impacts

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associated with disasters, especially as it reduces the,

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the economic activity or economic value.

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And this is measured through GDP,

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and they're not just looking at GDP value,

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but they're also looking at growth.

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So these growth

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or negative growth effects

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are predominantly evident in the short term,

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and it is more pronounced in developing economies where

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stimulus injection takes time

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or is either slow in response to the event.

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On the other hand, you have

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positive benefits in the short term.

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Uh, you've got the stimulus injection, and,

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and often this foster positive outcomes.

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'cause what it tends to do is it replaces

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or it forces governments and,

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and local institutions to actually replace old technology

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with new technology.

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Um, and,

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and through that, that through this whole process

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of recovery, you get this improved,

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adoption of technology.

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It often also leads to a clean slate for development.

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So while this is essentially not ideal,

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it does provide planners and, and,

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and city place making an opportunity to, to have new,

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and open space available to improve on

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what was there originally.

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So in addition to that,

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you also have different types of disasters.

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Uh, and, and these different types

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of disasters have a different impact on the

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growth of the economy.

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So where you have a meteorological disaster,

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which is essentially something to do with weather,

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mostly floods, what happens when you assess those kind

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of events is you often have a, a, a pro

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positive short-term impact.

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But when you look at geological disasters such

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as earthquakes, bigger adv, bigger disasters like

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that, you often have a negative impact.

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Also, it depends on where it takes place.

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So sometimes, if it,

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if it takes place within the rural environment,

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the impact is likely to be different compared to

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how large it will be if it is within an urban area.

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So at at this point, it mainly reveals

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that there is a, a mixture of results,

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and at most of the, most

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of the results reveal also

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that there is this gap within the, the

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regional understanding of how it interacts

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and how it influences the, the value of different kinds

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of, of, of industries.

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So with all these complexities, with the,

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in assessing disasters, specifically with relating, relating

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to the type of disaster

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and the duration of the scale scale,

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researchers are trying

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to look at ways in which they can actually assess, you know,

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this, this relationship.

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Now, the positive news for research is, is the fact

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that there is an increasing number of,

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of data points available, data available

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to assess disasters.

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So this, this essentially helps researchers to understand

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how the disaster economic next nexus operate.

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Uh, in addition, disaster studies tend to also mention,

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and the, the, the, the limited

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or the, the, the importance of, of accurate information

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and an accurate information during these disaster times

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or just after these disaster times are often difficult

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to source because there's breakdown of communication.

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Um, so that also makes it difficult for governments

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to essentially determine what they need to do.

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Now, the question then is how does

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that Im impact the assessment of, of research Now

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various ways

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and economic indicators are used to assess the impact

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for disasters, within literature.

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As you can, you can assess the impact either

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by looking at something like GDP per capita,

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you can look at production functions

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where if you take away some production,

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what is gonna be the, the impact,

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on, on the bigger economy.

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Some researchers look at nighttime lights and,

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and others like this study look at impulse

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response models similar to your input output kind of models.

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Now, luckily over time there's been an improvement in the

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data availability,

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and most studies, most reach

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researchers use the emergency events database.

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Um, so what this database does is it collects all the

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information of disasters,

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and then a researcher would add with these events,

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this database, they would add in GDP data.

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So they would look at, a national or regional GDP data

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and then consider essentially the aggregate

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performance of the economy.

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Now, unfortunately, the problem with, with, well,

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not the problem, but the limitation of this is the fact

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that when you include GDP data at, at an aggregate level,

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you actually include the stimulus injection as well.

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And that is something that this study is trying to eliminate

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and remove to assess

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how the underlying economy is performing.

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So it remains largely unknown how the, the in the industries

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or the sectors

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and their employment transition through a recovery period

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after a, a disaster such as an earthquake and the,

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and obviously the, the performance of the economy is likely

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to look different depending on that scale of the stimulus

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and also the type of disaster.

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So what this research does,

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and it try to, it's trying to assess the performance

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and the transition of employment for a regional economy

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by then removing this investment stimulus.

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And that will then give us insight into

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how employment transition at a regional

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and also at an industry level,

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makes the literature reveal a strong, a strong link

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between coral, construction and, and, and recovery.

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Now, within economic theory, this relationship between

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economic growth and construction is, is well recognized.

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So while there is this positive association,

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this relationship is not always, linear.

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So, so what does that mean?

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It essentially means that if there is an earthquake,

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it is highly likely that the industry that will benefit

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from a stimulus will be construction.

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And in addition to that

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construction activity has strong backward linkages

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with the rest of the economy such as manufacturing.

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So for the study, looking at Christchurch, you know,

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the region within, in the region within New Zealand,

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which is affected by, by these earthquakes,

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we are interested to understand how this contribution

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of stimulus is likely to impact the economy.

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And the expectation is

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that this contribution would predominantly be within

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the construction industry.

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Now, when assessing the construction industry, we find that

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before the earthquakes, the economic contribution

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of the construction industry was around 5% of,

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of economic activity,

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but this increased to around 7.5, 7.8%

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of GDP during the peak of the rebuild.

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So now when this is compared to the national average,

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the New Zealand average, we see that this cons, this

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contribution or this share has remained relatively stable.

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So while it has gone up in Canterbury, the,

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the national average of, of, of con

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of construction has remains relatively stable.

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Now, various studies have have assessed what is the,

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what is a good contribution

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to have from construction within the economy.

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Uh, and, and so these, these studies have found that,

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all these general consensus, consensus that this would range

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between three to 5% for most economies.

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So with this in mind,

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this study then looks at this relationship

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between construction or building activity

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and economic activity for the regional economy

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before the disaster.

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And we are looking at whether

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or not that relationship remains stable.

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Now, unfortunately, we can't assess that for Canterbury,

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but we can assess that for New Zealand as a whole.

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So when, when you assess, this level of,

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of, of relationship between these two variables, essentially

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what we are trying to determine is we're trying to determine

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what would the economy

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of Canterbury look like if there was no earthquake?

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What is the underlying economy? Can we quantify that?

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So by using the principles of, you know, a a three to 5%

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contribution to the economy,

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they're looking at canterbury's, economy

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and saying, well, it has been consistently around 5%.

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We, that, that, that gives us strong evidence to say

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that we can use a, a construction value

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as a counterfactual scenario for this research.

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So essentially saying, what would be the value

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of construction if there was no earthquake?

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Um, so that provides us with a scenario, what is,

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what the economy would look like

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without, the earthquakes.

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And then we could use that in order to,

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compare the actual numbers, the actual employment numbers,

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the actual, growth numbers for Canterbury

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with this counterfactual economy.

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So we've, we've established that first.

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Secondly, we then also use

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what we call an input output model.

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Now, the input output model is a, a regional economy model,

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and it's used to measure the interdependencies

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between the various industries

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or sectors within the economy.

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Now, in this instance,

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what we are doing is we are removing the economy,

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economy wide impacts of the, the stimulation.

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So we're looking at what is the counterfactual,

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what is the underlying economy,

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and removing the stimulus that that is above that level of,

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of, of construction activity, removing that out

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of the economy, essentially, then leaving us

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with the underlying economy or the demand driven economy.

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And in the timeline that we're considering this assessment

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On is between 2011 to 2021.

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So then we, what we will do,

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what we did in the study is we actually compared,

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the actual level of employment versus the underlying

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or demand driven level of employment, removing all these

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stimulus that is above the normal level

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of economic activity for the region.

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So stimulus investments, has, has driven the economy

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and has helped with the recovery

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of the Canterbury region after the disaster.

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But another question is, you know, what it,

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what changed in terms of the employment for the region?

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So when we look at the results of,

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of the model in this work, at the peak of the rebuild,

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more or less an additional 18,

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or excuse me, an additional 13,800 people were

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employed, in Canterbury.

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Now, this peak was reached around four years

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after the earthquake.

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Now comparing that with the underlying economy,

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essentially the counterfactual level of employment

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or level of economy,

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so this reveal a significant investment stimulus

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that is, that was driven significant investment,

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is account stimulus is accounted by,

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for the employment opportunities

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that were created within the region.

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And by looking at the data, we,

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we can observe two distinct periods.

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So the first period that we can,

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we can identify is within the initial five years.

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So after the initial five years,

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you had the earthquake in 2011, around 20 15, 20 16,

16:38.045 --> 16:40.065
you had the peak in employment opportunities.

16:40.965 --> 16:44.265
Uh, and when you look more deeply into the,

16:44.535 --> 16:47.065
into the assessment and into the growth patterns,

16:47.485 --> 16:51.185
you would see that this period is, is, is characterized

16:51.445 --> 16:54.025
by growth primarily from the stimulus.

16:54.325 --> 16:57.785
So this is essentially a first five year period that is

16:58.465 --> 17:02.575
stimulus driven from 2016 onwards.

17:02.835 --> 17:06.695
The second, the second distinct period is, is visible.

17:06.915 --> 17:08.455
And that is the period where

17:09.155 --> 17:12.455
we move away from a stimulus driven employment

17:12.995 --> 17:15.215
to more demand driven employment.

17:15.595 --> 17:17.695
So essentially what we're starting to see is we're starting

17:17.695 --> 17:22.615
to see a change or overlap from the stimulus investment.

17:23.275 --> 17:25.695
Uh, as the stimulus investment is going down,

17:25.875 --> 17:28.375
you start seeing the, the demand,

17:28.875 --> 17:31.855
the local demand from the underlying economy starting

17:31.875 --> 17:33.175
to drive the economy.

17:34.125 --> 17:37.065
But this is best seen when you look at the diagrams within,

17:37.445 --> 17:38.785
within the research paper.

17:40.315 --> 17:43.575
But on a sector level, at a local level,

17:43.635 --> 17:47.335
at a industry level, you also see changes and,

17:47.355 --> 17:50.285
and small nuances with regards to employment

17:50.345 --> 17:51.605
and how that has changed.

17:52.625 --> 17:56.205
So while construction is the industry that has,

17:56.235 --> 17:57.645
that is benefiting the most,

17:57.825 --> 18:01.845
we also see benefits in manufacturing, in wholesale trade,

18:02.625 --> 18:06.165
professional services, real estate services,

18:06.165 --> 18:07.725
with additional benefits.

18:08.025 --> 18:10.845
To be more specific, what we actually observe is

18:10.845 --> 18:15.645
that without the stimulus injection, within the economy,

18:16.825 --> 18:19.605
we, we, we have seen a negative

18:20.135 --> 18:22.445
employment level in construction.

18:22.985 --> 18:25.645
And this is mostly to do with the GFC

18:25.865 --> 18:30.365
and the lingering effects of what the GFC, still,

18:30.775 --> 18:32.845
still left on, within the economy.

18:34.245 --> 18:38.625
So the result also revealed that growth within some

18:38.625 --> 18:40.225
of these industries were not the same.

18:40.925 --> 18:42.105
Uh, so for example,

18:42.285 --> 18:45.025
you had manufacturing employment growth

18:45.095 --> 18:46.625
peaking a little later.

18:47.085 --> 18:48.425
So six years, six years

18:48.425 --> 18:50.145
after the, the stimulus

18:51.665 --> 18:53.625
construction peaked a lot earlier.

18:53.765 --> 18:55.625
So you had more or less two years

18:55.715 --> 18:58.505
after the, the earthquake,

18:58.525 --> 19:00.545
you had the peak in the construction growth.

19:01.155 --> 19:03.825
While an industry like wholesale

19:03.825 --> 19:08.145
and retail trade, the peak was around seven years later.

19:08.245 --> 19:10.785
So you don't have the consistent performance

19:11.285 --> 19:12.545
of all the industries

19:12.565 --> 19:15.385
and employment, all peaking at the same time.

19:15.485 --> 19:19.105
You see these different, different peaks,

19:19.215 --> 19:20.945
depending on the type of activity.

19:21.995 --> 19:25.095
So one would expect that employment levels will decline

19:25.865 --> 19:28.855
below historical growth, in the period

19:29.105 --> 19:30.735
after the rebuild.

19:30.835 --> 19:32.575
So once rebuild activities

19:32.715 --> 19:37.695
or the, the, the stimulus activity starts

19:37.695 --> 19:40.695
to wind down, you would expect that

19:41.585 --> 19:43.935
historical growth levels will go down.

19:43.935 --> 19:46.375
Employment levels will go down similar to

19:46.375 --> 19:48.695
what we see in in business cycles.

19:48.725 --> 19:50.735
However, this didn't happen.

19:51.695 --> 19:54.195
Um, we actually started to see convergence

19:54.195 --> 19:56.115
between the underlying economy

19:56.735 --> 19:59.115
and the stimulus driven economy.

19:59.165 --> 20:02.555
These two growth rates were growing towards one another.

20:03.295 --> 20:05.915
Um, so after a period of, of more

20:05.915 --> 20:09.555
or less 10 years where you had elevated employment

20:09.555 --> 20:11.995
opportunities driven predominantly

20:12.015 --> 20:14.235
by the stimulus injection, we,

20:14.375 --> 20:16.355
we could now see this convergent.

20:16.495 --> 20:19.315
So there was, instead of divergence, we saw

20:20.235 --> 20:23.235
convergence getting together and the economy essentially

20:23.235 --> 20:24.395
started to operate.

20:24.855 --> 20:28.675
Um, normally. So normal demand driven activity was now the

20:28.675 --> 20:30.035
driver of the economy.

20:31.105 --> 20:33.125
So, so we suggest,

20:33.345 --> 20:35.565
or the results essentially suggest that

20:36.265 --> 20:39.805
any additional employment benefit from the stimulus,

20:39.805 --> 20:43.085
within the built environment has subsided

20:43.215 --> 20:47.925
after a decade as stimulus activity starts to peak

20:47.945 --> 20:50.805
and overall employment levels start to decline

20:51.455 --> 20:52.765
below the national growth.

20:53.105 --> 20:56.805
We left with a question, how is employment transition

20:56.905 --> 20:59.845
and how does that, how does it perform,

20:59.865 --> 21:02.245
for the underlying economy, for the demand driven economy?

21:02.945 --> 21:05.565
So the findings of of this study suggests

21:05.565 --> 21:09.005
that in the short term, the response to stimulus injection

21:09.215 --> 21:13.565
after an earthquake is timely and it was timely

21:14.225 --> 21:17.045
and it limited the negative consequences of the disaster.

21:18.325 --> 21:20.785
Or to state it a little differently without the initial

21:21.105 --> 21:23.105
stimulus, the initial year

21:23.115 --> 21:26.345
after the earthquake would've experienced slow

21:26.445 --> 21:27.905
to moderate growth at best,

21:28.125 --> 21:31.545
but it didn't, it experienced significant employment growth.

21:32.645 --> 21:33.665
So with this in mind,

21:34.445 --> 21:36.905
the employment transition in construction

21:37.165 --> 21:39.665
and its industries benefited most,

21:40.605 --> 21:44.985
and this was supported at an industry level,

21:45.315 --> 21:48.865
especially after, a period of

21:49.845 --> 21:54.225
low growth between 2009 and 2016.

21:54.325 --> 21:57.265
So while the national economy experienced low growth,

21:57.725 --> 22:00.425
the local economy actually experienced really good growth

22:00.425 --> 22:02.025
within the construction industry.

22:02.995 --> 22:05.945
Employment transition reached its long-term

22:06.135 --> 22:07.585
equilibrium after 10 years.

22:08.685 --> 22:11.265
The first five years again was stimulus driven.

22:12.525 --> 22:16.025
The second five years was basically mostly demand driven.

22:16.645 --> 22:20.705
And by 2021, the level of employment already converged

22:20.965 --> 22:22.625
to its long-term growth position.

22:23.525 --> 22:27.185
Uh, with the construction industry, again, contributing to

22:27.185 --> 22:31.705
around 5% of cross value added like we've be spoken earlier,

22:32.125 --> 22:33.665
that's more or less the 5%

22:34.015 --> 22:36.025
that Canterbury is in equilibrium with.

22:37.005 --> 22:40.465
So further research with regards to what we have, what,

22:40.465 --> 22:44.105
what was done in this paper is to now look at the effect

22:44.125 --> 22:47.105
of other type of disasters, that comes to mind,

22:47.775 --> 22:50.385
also assessing the severity of the disasters

22:50.385 --> 22:52.785
and the influence on the recovery period.

22:53.725 --> 22:54.985
Uh, it's possible

22:55.205 --> 22:57.865
and likely that the recovery period could be linked

22:58.325 --> 23:00.105
to the magnitude of the disaster,

23:00.245 --> 23:03.425
but this needs further research in order to assess,

23:03.425 --> 23:04.625
whether or not that is true.

Impact of Disasters on Economic Recovery

00:00:00 - Large scale disruptive events, such as pandemics, disasters, and wars. They tend to have a lasting effect on society, and also they force economic activity to adjust. Now, disasters not only adjust economic activity, but it also affects the way in which economic systems function. So this is, this is typically of a negative impact, and these negative impacts have negative consequences on assets, on labor, on production, and as well as consumption.
00:00:37 - as a result of these disruptive events disrupt, you often get, uncertainty. People don't know what to respond, what to expect. governments dunno how to respond. So therefore, when we, when we look at these kind of events, there's value in assessing how the economy respond, and especially there's value in understanding how the economy through employment transitions during this recovery period
00:01:08 - So in particular, when we look at economic, the economic response and, and that economic response to disaster, this is often through stimulus and a stimulus intervention, and that influences the recovery rate. So you would have the, the investment or the stimulus intervention from government in order to mitigate those negative effects of, of the disaster. Now, we would think that, you know, when you do invest, when you do have these stimulation, interventions,
00:01:40 - to those negative impacts. but the, those impacts are likely also to change depending on the type of industries or the sectors that are influenced. Now, in the case of an earthquake, which is the topic of, of this study, it often leads to instant loss of infrastructure, not just infrastructure, but also human capital. And that could take years to replace. So within 20 10, 20 11, Canterbury in New Zealand had a significant number
00:02:14 - So the impact of this, of this earthquake was regional. It wasn't national. but that led to significant number or an amount of investment from government, not just government, but also insurance to actually rebuild the infrastructure that was lost. So the city had significant damage. Christchurch itself had significant damage within the CBD essentially closing it off for two years.
00:02:46 - that required repair, or improvement as a result of the damage. and, and this amounted to approximately 40 billion. The study essentially tries to contribute to what we call the growing regional disaster economies research. We are looking at Canterbury, New Zealand as a case study, and we are now trying to determine,

Disaster Impacts on Labor Market Dynamics

00:03:14 - allocation within the labor market, particularly the labor market, how that is affected as a result of, of these disaster activities and events. So several studies have, have been done on, on this nexus between the economy and disasters. And, and mostly of these studies have found two things. The first thing is I found mostly negative economic impacts associated with disasters, especially as it reduces the,
00:03:45 - And this is measured through GDP, and they're not just looking at GDP value, but they're also looking at growth. So these growth or negative growth effects are predominantly evident in the short term, and it is more pronounced in developing economies where stimulus injection takes time or is either slow in response to the event. On the other hand, you have
00:04:15 - you've got the stimulus injection, and, and often this foster positive outcomes. 'cause what it tends to do is it replaces or it forces governments and, and local institutions to actually replace old technology with new technology. and, and through that, that through this whole process of recovery, you get this improved, adoption of technology.
00:04:46 - So while this is essentially not ideal, it does provide planners and, and, and city place making an opportunity to, to have new, and open space available to improve on what was there originally. So in addition to that, you also have different types of disasters. and, and these different types of disasters have a different impact on the growth of the economy.
00:05:17 - which is essentially something to do with weather, mostly floods, what happens when you assess those kind of events is you often have a, a, a pro positive short-term impact. But when you look at geological disasters such as earthquakes, bigger adv, bigger disasters like that, you often have a negative impact. Also, it depends on where it takes place. So sometimes, if it,
00:05:49 - the impact is likely to be different compared to how large it will be if it is within an urban area. So at at this point, it mainly reveals that there is a, a mixture of results, and at most of the, most of the results reveal also that there is this gap within the, the regional understanding of how it interacts and how it influences the, the value of different kinds

Assessing Economic Impact of Disasters

00:06:22 - So with all these complexities, with the, in assessing disasters, specifically with relating, relating to the type of disaster and the duration of the scale scale, researchers are trying to look at ways in which they can actually assess, you know, this, this relationship. Now, the positive news for research is, is the fact that there is an increasing number of, of data points available, data available
00:06:52 - So this, this essentially helps researchers to understand how the disaster economic next nexus operate. in addition, disaster studies tend to also mention, and the, the, the, the limited or the, the, the importance of, of accurate information and an accurate information during these disaster times or just after these disaster times are often difficult
00:07:23 - so that also makes it difficult for governments to essentially determine what they need to do. Now, the question then is how does that Im impact the assessment of, of research Now various ways and economic indicators are used to assess the impact for disasters, within literature. As you can, you can assess the impact either by looking at something like GDP per capita, you can look at production functions
00:07:55 - what is gonna be the, the impact, on, on the bigger economy. Some researchers look at nighttime lights and, and others like this study look at impulse response models similar to your input output kind of models. Now, luckily over time there's been an improvement in the data availability, and most studies, most reach researchers use the emergency events database.
00:08:26 - information of disasters, and then a researcher would add with these events, this database, they would add in GDP data. So they would look at, a national or regional GDP data and then consider essentially the aggregate performance of the economy. Now, unfortunately, the problem with, with, well, not the problem, but the limitation of this is the fact that when you include GDP data at, at an aggregate level,
00:09:00 - And that is something that this study is trying to eliminate and remove to assess how the underlying economy is performing. So it remains largely unknown how the, the in the industries or the sectors and their employment transition through a recovery period after a, a disaster such as an earthquake and the, and obviously the, the performance of the economy is likely to look different depending on that scale of the stimulus

Assessing Employment Transition Post-Disaster

00:09:32 - So what this research does, and it try to, it's trying to assess the performance and the transition of employment for a regional economy by then removing this investment stimulus. And that will then give us insight into how employment transition at a regional and also at an industry level, makes the literature reveal a strong, a strong link between coral, construction and, and, and recovery.
00:10:07 - economic growth and construction is, is well recognized. So while there is this positive association, this relationship is not always, linear. So, so what does that mean? It essentially means that if there is an earthquake, it is highly likely that the industry that will benefit from a stimulus will be construction. And in addition to that construction activity has strong backward linkages
00:10:39 - So for the study, looking at Christchurch, you know, the region within, in the region within New Zealand, which is affected by, by these earthquakes, we are interested to understand how this contribution of stimulus is likely to impact the economy. And the expectation is that this contribution would predominantly be within the construction industry.
00:11:11 - before the earthquakes, the economic contribution of the construction industry was around 5% of, of economic activity, but this increased to around 7.5, 7.8% of GDP during the peak of the rebuild. So now when this is compared to the national average, the New Zealand average, we see that this cons, this
00:11:42 - So while it has gone up in Canterbury, the, the national average of, of, of con of construction has remains relatively stable. Now, various studies have have assessed what is the, what is a good contribution to have from construction within the economy. and, and so these, these studies have found that, all these general consensus, consensus that this would range
00:12:14 - So with this in mind, this study then looks at this relationship between construction or building activity and economic activity for the regional economy before the disaster. And we are looking at whether or not that relationship remains stable. Now, unfortunately, we can't assess that for Canterbury, but we can assess that for New Zealand as a whole.

Canterbury's Economy Without Earthquake Impact

00:12:45 - of, of relationship between these two variables, essentially what we are trying to determine is we're trying to determine what would the economy of Canterbury look like if there was no earthquake? What is the underlying economy? Can we quantify that? So by using the principles of, you know, a a three to 5% contribution to the economy, they're looking at canterbury's, economy
00:13:15 - We, that, that, that gives us strong evidence to say that we can use a, a construction value as a counterfactual scenario for this research. So essentially saying, what would be the value of construction if there was no earthquake? so that provides us with a scenario, what is, what the economy would look like without, the earthquakes.
00:13:47 - compare the actual numbers, the actual employment numbers, the actual, growth numbers for Canterbury with this counterfactual economy. So we've, we've established that first. Secondly, we then also use what we call an input output model. Now, the input output model is a, a regional economy model, and it's used to measure the interdependencies
00:14:14 - or sectors within the economy. Now, in this instance, what we are doing is we are removing the economy, economy wide impacts of the, the stimulation. So we're looking at what is the counterfactual, what is the underlying economy, and removing the stimulus that that is above that level of, of, of construction activity, removing that out of the economy, essentially, then leaving us with the underlying economy or the demand driven economy.
00:14:51 - On is between 2011 to 2021. So then we, what we will do, what we did in the study is we actually compared, the actual level of employment versus the underlying or demand driven level of employment, removing all these stimulus that is above the normal level of economic activity for the region. So stimulus investments, has, has driven the economy
00:15:21 - of the Canterbury region after the disaster. But another question is, you know, what it, what changed in terms of the employment for the region? So when we look at the results of, of the model in this work, at the peak of the rebuild, more or less an additional 18, or excuse me, an additional 13,800 people were employed, in Canterbury. Now, this peak was reached around four years after the earthquake.

Post-Earthquake Employment Dynamics in Canterbury

00:15:54 - essentially the counterfactual level of employment or level of economy, so this reveal a significant investment stimulus that is, that was driven significant investment, is account stimulus is accounted by, for the employment opportunities that were created within the region. And by looking at the data, we,
00:16:25 - So the first period that we can, we can identify is within the initial five years. So after the initial five years, you had the earthquake in 2011, around 20 15, 20 16, you had the peak in employment opportunities. and when you look more deeply into the, into the assessment and into the growth patterns, you would see that this period is, is, is characterized by growth primarily from the stimulus.
00:16:58 - stimulus driven from 2016 onwards. The second, the second distinct period is, is visible. And that is the period where we move away from a stimulus driven employment to more demand driven employment. So essentially what we're starting to see is we're starting to see a change or overlap from the stimulus investment. as the stimulus investment is going down,
00:17:28 - the local demand from the underlying economy starting to drive the economy. But this is best seen when you look at the diagrams within, within the research paper. But on a sector level, at a local level, at a industry level, you also see changes and, and small nuances with regards to employment and how that has changed. So while construction is the industry that has,
00:17:57 - we also see benefits in manufacturing, in wholesale trade, professional services, real estate services, with additional benefits. To be more specific, what we actually observe is that without the stimulus injection, within the economy, we, we, we have seen a negative employment level in construction. And this is mostly to do with the GFC and the lingering effects of what the GFC, still,
00:18:34 - So the result also revealed that growth within some of these industries were not the same. so for example, you had manufacturing employment growth peaking a little later. So six years, six years after the, the stimulus construction peaked a lot earlier. So you had more or less two years after the, the earthquake, you had the peak in the construction growth.

Employment Trends Post-Earthquake Recovery

00:19:03 - and retail trade, the peak was around seven years later. So you don't have the consistent performance of all the industries and employment, all peaking at the same time. You see these different, different peaks, depending on the type of activity. So one would expect that employment levels will decline below historical growth, in the period after the rebuild. So once rebuild activities
00:19:37 - to wind down, you would expect that historical growth levels will go down. Employment levels will go down similar to what we see in in business cycles. However, this didn't happen. we actually started to see convergence between the underlying economy and the stimulus driven economy. These two growth rates were growing towards one another.
00:20:05 - or less 10 years where you had elevated employment opportunities driven predominantly by the stimulus injection, we, we could now see this convergent. So there was, instead of divergence, we saw convergence getting together and the economy essentially started to operate. normally. So normal demand driven activity was now the driver of the economy. So, so we suggest,
00:20:36 - any additional employment benefit from the stimulus, within the built environment has subsided after a decade as stimulus activity starts to peak and overall employment levels start to decline below the national growth. We left with a question, how is employment transition and how does that, how does it perform, for the underlying economy, for the demand driven economy? So the findings of of this study suggests
00:21:09 - after an earthquake is timely and it was timely and it limited the negative consequences of the disaster. Or to state it a little differently without the initial stimulus, the initial year after the earthquake would've experienced slow to moderate growth at best, but it didn't, it experienced significant employment growth. So with this in mind, the employment transition in construction
00:21:40 - and this was supported at an industry level, especially after, a period of low growth between 2009 and 2016. So while the national economy experienced low growth, the local economy actually experienced really good growth within the construction industry. Employment transition reached its long-term equilibrium after 10 years.

Demand-Driven Recovery in Canterbury's Economy

00:22:12 - The second five years was basically mostly demand driven. And by 2021, the level of employment already converged to its long-term growth position. with the construction industry, again, contributing to around 5% of cross value added like we've be spoken earlier, that's more or less the 5% that Canterbury is in equilibrium with. So further research with regards to what we have, what,
00:23:03 - of other type of disasters, that comes to mind, also assessing the severity of the disasters and the influence on the recovery period. it's possible and likely that the recovery period could be linked to the magnitude of the disaster, but this needs further research in order to assess, whether or not that is true.

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