Score contribution per author:
α: calibrated so average coauthorship-adjusted count equals average raw count
Why do some historical shocks permanently impact local development, while others do not? This paper examines how institutions influence local recovery to population shocks, using a model with multiple regions and increasing returns to economic activity within regions. Extractive institutions crowd out productive activity, making its spatial coordination more difficult in the aftermath of large, negative shocks. Hence, when one region experiences such a shock, extractive institutions can hinder recovery, ensuring a redistribution of productive activity away from that region over the long-run. Using a dataset of major earthquakes and 1860 world cities from 1973 to 2018, I find sustained negative effects of earthquakes on city population growth, with effects being driven by cities located outside of stable democracies, consistent with the theory.