  The consequences of natural disasters, such as earthquakes, are evident:
death, coordination problems, destruction of infrastructure, and displacement
of population. However, according to empirical research, the impact of a
natural disaster on economic activity is mixed. Natural disasters could have
significant economic effects, especially in developing economies. This is
particularly important for highly seismic countries such as Chile and New
Zealand. This paper contributes to the literature on natural disasters and
economic development by analyzing the cases of two affected regions within
these countries in the wake of major earthquakes experienced during 2010-2011:
Maule (Chile) and Canterbury (New Zealand). We examine the impact of natural
disasters on GDP per capita by applying the synthetic control method. Using the
synthetic approach, we assess the effects of these two earthquakes by building
counterfactuals to compare their recovery trajectories. We find that Chile and
New Zealand experienced opposite economic effects. The Canterbury region grew
10% more in three years than its synthetic counterfactual without the
earthquake, while the Maule region declined by 5%. We build synthetic controls
at a regional and economic-sector level, looking at aggregated and sectoral
effects. The difference in institutions, such as property rights and the large
amount of government spending given for reconstruction after the New Zealand
earthquake relative to Chile's, help to explain the difference in outcomes.
