The Effects of Disaster Assistance on Regional Economic Resilience: Evidence from South Korea

• In Event: Student Research Panel on National Security and Disasters

Abstract

The central government of Korea alleviates the fiscal burden on local governments and expedites recovery by allocating national resources through the Special Disaster Areas (SDA) designation system. While the SDA designation aims to improve fiscal, financial, medical, and administrative conditions in severely disaster-affected areas, empirical evidence on its actual impacts on regional economic recovery and public health remains limited. Assessing the effectiveness of disaster relief policies is essential for efficient allocation of limited government resources and for refining the future SDA designation system. Therefore, this study employs a quasi-experimental design to examine the heavy rainfall SDA designation cases (2020-2024), addressing the question of how SDA designation affects regional economic resilience. We use land price dynamics as a proxy for local economic fundamentals. We interpret land and property prices as reflecting the aggregate present value of local amenities, infrastructure quality, and productive capacity, thereby capturing the cumulative outcome of disaster damage and subsequent recovery across multiple economic channels. Employing the continuous treatment difference-in-differences framework of Callaway, ranging from 0 (no declaration) to 1 (entire jurisdiction declared). This design exploits the institutional feature that declarations target sub-municipal administrative units(county) while generating varying treatment "doses" at the si/gun/gu(city) level, ranging from 0 (no declaration) to 1 (entire jurisdiction declared), thereby dissolving the scale mismatch problem that has constrained prior research. The control group comprises si/gun/gu units that experienced heavy rain damage during the same disaster event. Our estimation proceeds in three phases: a binary collapse (declaration vs. none) to establish baseline effects, a discretized intensity analysis to detect nonlinearities, and a fully nonparametric continuous specification. Our dataset integrates multiple administrative sources spanning heavy rain disaster events from 2020 to 2024. Land price outcomes are measured using three complementary indicators from the Ministry of Land: (1) real transaction prices, capturing market-level price variation for urban and peri-urban areas; (2) regional land price index, providing appraisal-based monthly price trends at the si/gun/gu level that are not subject to transaction selection bias; and (3) Korea Rural Community Corporation's quarterly farmland price survey, capturing agricultural land values for rural si/gun/gu where farmland constitutes the primary economic asset. Socio-demographic controls cover fiscal independence ratios, industrial composition, population density, and prior disaster exposure and are obtained from the Korean Statistical Information Service. The analysis covers approximately 250 si/gun/gu units observed at monthly frequency, with staggered treatment adoption across multiple disaster events providing sufficient variation in both timing and intensity for credible identification. We anticipate that Special Disaster Zone Declarations will exhibit a statistically significant positive effect on land price recovery trajectories. Specifically, si/gun/gu units that received declarations are expected to display smaller initial price declines and faster reversion toward pre-disaster trends compared to non-declared units with similar disaster exposure.

Author

• Yoonseo Bae, Seoul National University
  Presenting Author